On August 5, there was a circuit breaker, and then another circuit breaker... This day was definitely a turning point for the global market. Almost all stock markets were not spared and all fell.
Asian and Pacific stock markets plummeted, European and American stock index futures tumbled, market volatility and panic sentiment are surging, and global stock markets are suffering a "massacre."
It all started with the unexpectedly cold U.S. non-farm data last week, which triggered market concerns that the Federal Reserve would miss the best time to cut interest rates and that the economy would fall into recession. Investment banks also revised their expectations for the Fed's rate cuts. Pessimism spread to this week, with Asian stocks, bonds, crypto markets and other markets plummeting at the opening, and no one was spared.
- Nikkei 225 index plunges 15%
- Japan's Topix falls 10%, worst day since 1987
- South Korea's ChiNext Index plunged 8% before the circuit breaker, wiping out the gains since November last year
- MSCI Asia Pacific Index plunges 5%, wiping out all gains through 2024
- Türkiye's stock market triggered a market-wide circuit breaker after opening, and then another circuit breaker
- Italy's FTSE MIB index fell more than 4%
- The pan-European Stoxx 600 index fell 5.1% to its lowest point since January.
- Vietnam VN Index fell 4%
- Indonesia's main stock index fell 4%
- Germany's DAX fell 3%
- The UK FTSE 100 index opened down 1.89%
- Spain's IBEX35 index opened down 2.79%
- Italy's FTSE MIB index opened down 4.15%
- Euro Stoxx 50 index opened down 3.01%
- France's CAC40 index opened down 2.42%
- Israel's TA-35 benchmark stock index fell 3%, the biggest drop since October last year.
- Saudi Arabia's Tadawul Composite Index fell 3.5%, the biggest drop since June 2022
- The three major A-share indices all fell by more than 1%, erasing the gains made earlier today.
Markets begin pricing in an early rate cut from the Fed
As global markets crash, traders have begun betting on a quick rate cut by the Fed, with a 60% chance of a 25BP cut within a week. The market has shown clear signs of panic as the Fed kept interest rates unchanged at its most recent meeting, with Powell saying a rate cut could be discussed at the September meeting. There are even rumors that the Fed will hold an emergency meeting to discuss revisiting interest rates, though the news is considered fake.
The crypto market reacted violently, with Bitcoin hitting a new low since February
The crypto market reacted even more strongly, with Bitcoin falling below $50,000, a daily drop of more than 17%, and Ethereum falling below $2,100, a daily drop of more than 20%. The total market value of cryptocurrencies once fell below $1.9 trillion, with a 24-hour drop of up to 17%, a loss of nearly $300 billion in market value.
From the news perspective, the crypto market's decline was affected by multiple factors. In addition to the macroeconomics, there were also some negative factors within the crypto market.
Jump Trading has recently sold off ETH in large quantities, and has sold 83,000 wstETH since July 24, equivalent to about 377 million US dollars. This is also the main reason why ETH led the decline in the crypto market this time. According to Arthur Hayes, co-founder of BitMEX, he learned through news channels in the traditional financial field that a "big man" was disposed of and sold all his crypto assets. He added that he was not sure whether the news was true, but he would not disclose the specific name.
The community largely speculated that it was referring to Jump Trading. Many speculated that the company might be liquidating its crypto assets amid an investigation by the U.S. CFTC.
Regarding this round of market decline, Justin d'Anethan, head of business development for Asia Pacific at cryptocurrency market maker Keyrock, said:
“Unlike before, this market is driven by feels rather than Bitcoin, of course, this is due to Ethereum spot ETF trading and large investors unwinding their ETHE (Grayscale ETH Fund) positions.”
Min Jung, Analyst at Presto Research:
The decline in Bitcoin and Ethereum can be attributed to several factors. “First, the employment data released last Friday was significantly lower than expected, with only 114,000 jobs added. This exacerbated recession fears, causing the Nasdaq to fall 2.43% and the S&P 500 to fall 1.84%.”
Panic in the crypto market has exploded
As of press time, the crypto market has recovered some of its losses, with Bitcoin recovering to around $52,600, down 10.7%, and Ethereum recovering to around $2,350, down 16.7%.
