The price of Bitcoin fell 15% to a low of $49,000 on Binance (BTC/USDT) over the course of the last 24 hours, indicating a dramatic divergence from its 26% collapse from last week’s $70,000 high. Likewise, Ethereum (ETH) fell from $3,400 to $2,100, a 39% decline. Not only did this downward trend affect one particular altcoin, but it also affected others with even steeper declines.
Recession Fears Cause Bitcoin Crash
The initial cause of the current market turbulence seems to be growing concerns about a US recession, which were sparked by Friday’s surprisingly poor US job market data. The July report revealed a mere 114,000 job gain, well short of the 175,000 jobs that Wall Street had predicted. This was almost the lowest job growth since the COVID-19 pandemic began in March 2020 and the weakest since December of the previous year.
Through X, Charles Edwards of Capriole Investments stated, “We have a recession every time the unemployment rate rises to its current level.” It appears that the Fed was too slow to ease in 2024, just as they were too slow to tighten in 2021.
The news that Berkshire Hathaway, led by Warren Buffett, had sold nearly half of its Apple holdings added to the market’s anxiety. A move to protect against possible market downturns was assumed to be behind this sell-off by one of the most watched investors in the world, especially since Berkshire Hathaway revealed in its Q2 report that it held a record $277 billion in cash.
Significant ramifications have also resulted from the Bank of Japan’s decision to increase its benchmark interest rate from a range of zero to roughly 0.1% to roughly 0.25%. This rate increase, the second since 2007, shocked the world’s financial markets. Rate increases by the Japanese central bank have historically been associated with worldwide recessions. The Nikkei saw its biggest two-day decline in history after the announcement, exceeding even the drops observed on Black Monday in 1987.
Wall Street Journal reporter Nick Timiraos, known as the “Fed’s mouthpiece,” disclosed, saying, “Goldman Sachs says there are good reasons to think the rising unemployment rate in the weak-across-the-board July payroll report is less fearsome than normal.however increases its chances of tracking recession probabilities from 15% to 25%.
Goldman Sachs also revised its projections for the Federal Reserve’s policy response, projecting rate reductions at each forthcoming meeting and possibly a more aggressive 50 basis point cut in the event that the July weakness in the employment report is repeated in August.
Yen Carry Trade Unwind
Significant movement in the forex markets, especially with the Japanese yen, contributed to the market’s decline. The yen gained a significant amount of strength in relation to the US dollar following the Bank of Japan’s hike in its key interest rate. By borrowing yen at cheap rates to buy higher-yielding US assets, traders who had participated in the “yen carry trade” were put under pressure by this action.
According to Adam Khoo, “the sharp decline in US stocks is partly due to the massive unwind of yen carry trade positions caused by the JPY/USD sharp rise.” The reversal of these trades has likely had an effect on the stock and forex markets as well as Bitcoin and other cryptocurrencies as assets are liquidated to offset losses and pay off debt denominated in yen.
“My TradFi birdies are telling me somebody big got smoked, and is dumping all #crypto,” said BitMEX founder Arthur Hayes in a statement via X. I won’t name names because I don’t know if this is true, but please let the family know if you hear the same thing.
Jump Trading And Large Sellers
Surprising sell orders were observed on Sundays, which are usually quieter trading days, on popular exchanges like Coinbase, Gemini, and Kraken. This points to coordinated moves by major players, possibly including the unwinding of positions held by companies such as Jump Trading.4
Over the last two weeks, Jump Trading is said to have been involved in a significant Ethereum unloading, totaling roughly $500 million. According to market rumors, the company’s sell-off may be the result of an urgent need for liquidity or a calculated strategic exit from its cryptocurrency market-making endeavors. “I’m watching this selling by Jump Trading,” said Ran Neuner via X. Why are they selling so quickly on a Sunday with little liquidity, if they are the world’s smartest traders? They must be in liquidation or have an urgent duty, I would guess.
The CEO of the Cake Group, Dr. Julian Hosp, made the following suggestion on X: “Jump Trading appears to be the cause of the insane crypto sell off. They are either leaving the crypto business for regulatory reasons (related to Terra Luna) or are getting margin called in traditional markets and need liquidity over the weekend. Atm, the sell-off is unrelenting.
In addition, Mike Alfred emphasized the potential for market distress by speculating that a sizable Japanese fund that held significant holdings of Ethereum and Bitcoin may have failed. “A large Japanese fund burst. Regretfully, it contained some Ethereum and Bitcoin. Sensing the distress, Jump and other market makers intensified the move. That is all. The game is over. Moving on to the next one,” said Alfred.
Liquidation Cascade Exacerbates Bitcoin Price Crash
The market saw a sharp rise in the number of liquidations; according to CoinGlass, 277,937 traders were let go in the previous day alone, resulting in roughly $1.06 billion worth of cryptocurrency liquidations overall. With a $27 million valuation, the biggest single liquidation order happened on Huobi for a BTC-USD position.
According to Coin Glass data, $302.07 worth of Bitcoin longs were liquidated in the last day. The precipitous decline in cryptocurrency prices, resulting from stop-loss orders and margin calls, has intensified these forced liquidations.
Trump Momentum Fades
The changing political landscape may also play a minor role, as Kamala Harris is predicted by Polymarkets to beat Donald Trump (Harris 43% vs. Trump 55%). The cryptocurrency market, including Bitcoin, views this change negatively. The whole market is pointing toward a Trump victory. In addition to saying over the weekend that Bitcoin could be used to pay off the $35 trillion US debt, he wants to amass a “strategic Bitcoin stockpile.”
Mt. Gox Distributions Still Affecting Market Liquidity
The changing political landscape may also play a minor role, as Kamala Harris is predicted by Polymarkets to beat Donald Trump (Harris 43% vs. Trump 55%). The cryptocurrency market, including Bitcoin, views this change negatively. The whole market is pointing toward a Trump victory.
In addition to saying over the weekend that Bitcoin could be used to pay off the $35 trillion US debt, he wants to amass a “strategic Bitcoin stockpile.”
