The situation is similar in the altcoin market, led by falls in Near Protocol (-26.8%), Chainlink (26%), Ethereum (23%), Dogecoin (-22%), Binance Coin (-19.2%). The market is fleeing risk assets.
What is the perspective of digital asset analysts?
“Crypto prices are falling, but indicators suggest we are close to a bottom,” says Simon Peters, senior crypto analyst at eToro.
“Risk assets took a nosedive during Monday’s Asian session as a weaker US jobs report and higher unemployment rate on Friday, as well as a rise in the Japanese yen following the Bank of Japan’s recent interest rate hike, caused investors to flee risk assets,” Peters notes.
“The recent sharp drop in both cryptocurrency and stock prices over the past few days can be attributed to a mix of macroeconomic and crypto-specific factors, although the former seem to be more influential at the moment,” agrees Javier García de la Torre, Country Manager of Binance Spain and Portugal.
“Speaking of cryptocurrencies specifically, the widespread market decline triggered by recession fears has led to the reallocation of capital away from riskier assets, with digital currencies still largely perceived as such. This move has been exacerbated by the recent dynamics of the US presidential race, which some market participants see as potentially less favorable for cryptocurrencies as an asset class. Finally, in the cryptocurrency market, the summer months have historically been slower than other months of the year, with systematically lower returns. It is possible that this seasonal dynamic is also coming into play here,” adds García de la Torre.
Bullish bets on futures lost nearly $200 million, CoinGlass data shows, as more than 97,000 traders liquidated their positions over the past 24 hours. ETH longs led the losses with $55 million, followed by Bitcoin longs with $43 million.
These movements occur after a bearish week on Wall Street, where the Nasdaq has corrected more than 10% from its historical highs. The European stock markets are also falling sharply, but the movements are even modest compared to the collapse of the Asian stock markets. The Japanese Nikkei has plummeted by 13% (its biggest fall since the ‘crash of 1987’).
The US economy and fear of a recession affected world stock markets
As we say, one of the reasons behind this fall is the fear that the US economy could slow down so much that it ends up entering recession. In this regard, the employment report released last Friday was the latest data to highlight the recent weakness of the world’s largest economy. In July, The US labor market created “only” 114,000 jobs, much lower than consensus expectations and the previous June figure.
“The narrative has changed literally overnight“, said Torsten Slok, chief economist at Apollo, in a statement reported by the ‘Financial Times’.
According to this expert, Investors are weighing up whether the employment figure is a sort of “statistical fluke” or whether the US is entering “a period of more severe slowdown.” Juan José Fernández-Figares, director of analysis at Link Securities, also points out that this has caused a fall in the yields on 10-year US bonds to 3.80%, “given the possibility that the US economy will suffer a ‘harder landing than expected’, instead of the ‘soft landing or no landing’ previously predicted.”
Some analysts also wonder If the Federal Reserve (Fed) is too late in its process of easing interest rates and, consequently, caused this weakness in the US economy. Recently, Chairman Jerome Powell warned that they would only lower rates in September if the data improved enough to give the central bank confidence, but there are already many voices calling for the Fed to lower rates by 50 basis points at its next meeting.
“The market is expecting a 50 basis point rate cut by the Federal Reserve at its September meeting, which I think will be too much. The US economy is showing signs of slowing, but It is not as serious as the market is pricing in”notes Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.
On the other hand, Geopolitical risks are not favourable to the stock markets either. In recent days, some of the top leaders of Hamas and Hezbollah have been killed and Iran holds Israel responsible for these deaths, especially that of Ismail Haniyah, since it occurred on Iranian territory. Reports from The New York Times and other major American newspapers warn that Iran could be preparing to attack Israel imminently.
Source: Ambito
I am a 24-year-old writer and journalist who has been working in the news industry for the past two years. I write primarily about market news, so if you’re looking for insights into what’s going on in the stock market or economic indicators, you’ve come to the right place. I also dabble in writing articles on lifestyle trends and pop culture news.