Author: Nancy, PANews
The global "circuit breaker wave" four years ago is still vivid in our memory. Today, the Japanese stock market plunge triggered the circuit breaker again, and the global stock market fell further due to multiple factors such as the slowdown of the US economy and the increase of geopolitical risks. The panic in the market spread rapidly. Cryptocurrency is also experiencing a "Black Monday", with Bitcoin leading the flash crash and the market experiencing a sharp drop across the board.
Over 1 billion USD worth of long positions accounted for 90% of the total, and whale and market makers "withdrawn" one after another
According to Binance market data, in the past 24 hours, the price of Bitcoin plummeted to about $51,417, with a maximum intraday decline of nearly 15.2%; Ethereum fell to a low of $2,111, with a maximum intraday decline of more than 21.7%, basically wiping out this year's gains. Most of the other cryptocurrencies have experienced double-digit declines. According to CoinGecko data, as of the time of writing, the total market value of cryptocurrencies has fallen below the $2 trillion mark, falling to $1.9 trillion, wiping out more than $270 billion in a single day, and a decline of 15.3% in 24 hours.
Affected by this, Coinglass data shows that in the past 24 hours, the number of people who have been liquidated on the entire network has exceeded 269,000, and the amount of liquidation has reached 1.02 billion US dollars, mainly concentrated in Bitcoin, Ethereum and Solana. Nearly 90% of them came from long orders, with an amount of 892 million US dollars, and short orders were 133 million US dollars. At the same time, the crypto market is already in a state of "fear". According to the latest data from Alternative, today's Fear and Greed Index (FGI) has dropped to 26 points, and the market's greed sentiment continues to decline.
The on-chain loan liquidation volume also hit a new high amid the sharp drop. According to data from Parsec, an encrypted on-chain analysis platform, in the past 24 hours, the loan liquidation volume on DeFi exceeded US$320 million, setting a new high for the year. Among them, the ETH collateral liquidation volume reached US$187 million, wstETH reached US$77.9 million, and wBTC reached US$32.5 million. And with the soaring liquidation amount, the Ethereum browser Etherscan shows that as of the time of posting, the Gas fee on the Ethereum network has soared from the previous single digits to 985Gwei. According to DefiLlama data, if Ethereum falls 20% to US$1,841 from the current price, there will be at least about US$187 million in loan liquidations on the chain.
Among them, many whale using leverage have been liquidated. For example, according to the monitoring of on-chain analyst Ember, ETH fell sharply this morning, causing some on-chain leveraged ETH whales to be liquidated, and further pushed the price of ETH down by more than 20%. Among them, 4 whales had a total of 14,653 ETH liquidated this morning, worth about $33.54 million. And PeckShield monitoring also shows that the address starting with 0x6f3b has been liquidated 1,111 WETH (worth $3.14 million) and 45,290 LINK (worth $493,000), the address starting with 0x47ab has been liquidated about $5.28 million of WBTC and more than $156,000 of cETH, and the address starting with 0x790c has been liquidated 20,500 AAVE (about $2 million), etc.
As the crypto market fell sharply, many whale and market makers have also significantly reduced their positions. For example, according to the on-chain analyst Yu Jin, Jump Trading recently redeemed $410 million of wstETH in batches and transferred it to CEX (centralized exchange). BitMEX Lianchuang also recently posted that a "big guy" fell and sold all crypto assets, alluding to Jump Trading. Lookonchain monitored that the agency has sold $377 million worth of wstETH since July 24. At the same time, The Data Nerd monitoring showed that Wintermute also deposited UNI, ETH, WBTC and USDT to Binance on August 4, totaling more than $100 million; @ai_9684xtpa data monitoring, the whale 0xfC0 who locked PENDLE in the past six months also suspected of losing nearly 40% on August 4; Lookonchain data monitoring, a Smart Money also deposited 2,500 ETH to Binance yesterday.
However, some whale and hackers choose to buy the dips. For example, according to Lookonchain monitoring, after the market crash, a whale address that had made a profit of $76 million on ETH bought 6,000 ETH (about $13.9 million) at the buy the dips again; the hacker address of the Nomad attacker spent 39.75 million DAI to buy 16,892 ETH at the bottom one hour ago and deposited the ETH into Tornado.Cash.
Multiple negative events are the "black hands" behind the big drop
Government and compensation selling pressure, macroeconomic downturn, geopolitical risks and Trump's declining chances of winning the election are believed to be the "black hands" behind the sharp drop in the crypto market.
Unexpected surge in supply puts downward pressure
QCP Capital pointed out that the market experienced a sharp correction, and the decline was mainly caused by an unexpected surge in Bitcoin supply. There were several key events that caused this supply shock, including the release of approximately 28,000 Bitcoins by the US government, the distribution of nearly 34,000 Bitcoins in the Mt. Gox settlement agreement, and the distribution of $1.5 billion worth of Bitcoin and ETH by Genesis creditors.
At the same time, the agency also pointed out that the recent increase in Bitcoin mining difficulty, which has risen to 10.5% to reach an all-time high, has put additional pressure on miners, forcing them to liquidate their holdings.
Macroeconomic indicators deteriorated, U.S. stocks fell collectively, and Japanese stocks were halted
Continuing the turbulent trend of last week, US stock futures fell collectively, with the S&P 500 index futures closing down 1.84%, the Nasdaq closing down 2.38%, and the Dow Jones Industrial Average closing down 1.51%. It is worth mentioning that Berkshire Hathaway, owned by Buffett, significantly reduced its holdings of Apple by 50% in the second quarter, which is considered by the market as an important signal that the US stock market has peaked.
The decline in US stocks came from the collapse of confidence in the US economy, mainly due to the recent impact of a number of economic data. It is reported that the US unemployment rate in July was 4.3%, the highest since October 2021, triggering Sam's Law, which indicates an economic recession. Although the market generally believes that the Fed will cut interest rates for the first time in September, it is said that the timing is "too late", and Barclays, the second largest bank in the UK, also pointed out that the Fed is unlikely to cut interest rates by 50 basis points in September.
"Macroeconomic indicators fueled bearish sentiment," QCP Capital said in a report. A higher-than-expected unemployment rate of 4.3% and concerns about an impending recession heightened investor concerns, and the Chicago Board Options Exchange Volatility Index (VIX), a key measure of market volatility, soared to above 28, the highest level since the regional banking crisis in March 2023, further exacerbating market uneasiness.
In addition to the Federal Reserve, the interest rate decision of the Bank of Japan is also worthy of attention. Under the global trend of interest rate cuts, the Bank of Japan announced a 15 basis point interest rate hike last week, raising the policy interest rate to 0.15%-0.25%. The scale of this rate hike exceeded the market's expectations of 10 basis points. From a historical perspective, the Bank of Japan's interest rate hike is often considered one of the important signals for predicting a global economic recession. With the news of the interest rate hike and the reduction of the scale of government bond purchases, the yen-dollar exchange rate soared to the 144 yen range, a 7-month high. The reversal of the yen's trend also reduced the attractiveness of carry trades. Affected by this, the Japanese stock market also plummeted. After the opening of Asian stock markets on Monday, the Japanese stock market continued to fall. The Nikkei 225 Index and the Topix Index fell all the way and triggered the circuit breaker mechanism.
Heightened geopolitical tensions
The situation in the Middle East is affecting the world. The military confrontation between Israel and Iran is intensifying. In particular, the recent assassination of Ismail Haniyeh, the leader of the Hamas armed group, by Israel has added fuel to the fire. According to the latest news, Iran may attack Israel within 24 hours. Geopolitical tensions put pressure on the stock market. The intensification of geopolitical tensions has driven up risk aversion and impacted global financial markets, especially the stock market, which has gradually fallen from its highs.
Trump's chances of being elected US president decline
Since Republican presidential candidate Trump included cryptocurrency in his "America First" agenda, including pledging to establish a "national bitcoin reserve", proposing to repay $35 trillion in national debt with bitcoin or "crypto checks", and appointing a presidential advisory committee on bitcoin and cryptocurrency, he has received strong support from the crypto market. However, after Biden announced his withdrawal from the re-election campaign and supported the nomination of Harris, Trump's chances of winning the election began to decline, while Harris's chances increased.
According to Global Market Report, Trump raised $138.7 million in July, less than what Harris raised in the first week of the campaign, and currently has a total of $327 million in cash. Harris' campaign team previously announced that it had raised a record $200 million in 7 days, and two-thirds of it came from first-time donors. Recently, more than 200 venture capitalists have voiced their support for Harris, including billionaires Mark Cuban, Reid Hoffman and Reid Hoffman, as well as industry leaders such as Kleiner Perkins co-founder Brook Byers, SV Angel's Ron Conway and Cowboy Ventures' Aileen Lee.
According to the latest Reuters/Ipsos poll, Harris is slightly ahead of Republican presidential candidate Trump by 1 percentage point. At the same time, according to the decentralized prediction market Polymarket data, as of August 5, Harris's probability of becoming the "winner of the 2024 presidential election" has risen to 43%, while Trump's has dropped to 53%. In this regard, Ruslan Lienkha of the online exchange YouHodler analyzed that the increase in Harris's chances of being elected may be bad for Bitcoin, and crypto market participants will continue to face pressure from the US SEC.
However, Harris is currently extending an olive branch to the crypto industry. According to insiders, Harris may share her stance on Bitcoin in the coming weeks, and she will participate in a virtual roundtable meeting held by crypto industry executives this week to discuss digital asset policies. Harris' campaign team has also contacted key crypto industry figures such as Coinbase and Circle, and said that the purpose of starting contact with the crypto industry is not to donate money, but to pave the way for a reasonable regulatory framework.
Short-term market still faces uncertainty
After experiencing a waterfall-like decline, how will the crypto market perform in the future?
"Historically, market activity in August has been sluggish, and it is typically a month when the cryptocurrency market is unfavorable to seasonal factors." Coinbase recently pointed out in a report that over the past five years, Bitcoin's average decline in August was 2.8%. Reduced liquidity and trading volume may lead to increased volatility in August, and we may see the same sluggish market performance this year.
Michael van de Poppe, founder of MN Trading, pointed out that Ethereum is holding a key support area. If this level cannot be maintained, it may have an impact of about 4% on the price and push Bitcoin further down to a range that traders cannot determine.
Andrew Kang, co-founder and partner of crypto venture capital firm Mechanism Capital, posted on social media that he would no longer bet that ETH would fall further, but the market might fall further and it would be better to focus on looking for future buying opportunities.
"Assuming that the stock market follows the downward trend of the ISM index and even begins to expect the economy to fall into recession, in this case, the stock market may fall sharply in the coming quarters, which will also have a significant negative impact on Bitcoin. If this happens, the price of Bitcoin may return to the $50,000 level or even fall further." Markus Thielen, an analyst at cryptocurrency research firm 10x Research, also pointed out.
However, Matrixport also stated in its latest analysis report that despite the recent weakening of Bitcoin's momentum, it is expected to perform well in the fourth quarter. From a technical perspective, the price fluctuation range of Bitcoin is narrowing, which indicates that it is about to get out of the consolidation phase and is expected to achieve a breakthrough in the next few weeks. As CPI will gradually decline in the next 12 months, it will create a favorable environment for assets such as Bitcoin. We are optimistic about the performance of Bitcoin in the fourth quarter and expect a breakthrough.
Bitwise CEO Hunter Horsley recently posted on social media that he is bullish on Bitcoin. “It is still early days for crypto ETFs to acquire model portfolio allocations, but it is growing, which is the ultimate goal. 2024 is the beginning of the mainstream era of Bitcoin. Willy Woo, a well-known cryptocurrency analyst, even predicted that based on a 3% portfolio allocation, the final price of Bitcoin could exceed $700,000.
