About 900 million dollars were liquidated, breaking key support levels consecutively. Is the plunge in Bitcoin due to the U.S. economic recession?

Author: 1912212.eth, Foresight News

The extent of the market crash has exceeded most people's expectations. After BTC lost the $60,000 mark last night at 10 PM, it plummeted significantly below $53,000, reaching a low of $52,300, with a 24-hour drop of over 10%, marking a new low for BTC since March of this year. BTC has now stabilized above $54,000.

ETH also fell below $3,000, dropping to a low of $2,111, with a 24-hour decline of over 20%, and has now stabilized above $2,300. This price has nearly erased all gains for ETH this year. Altcoins generally saw declines around 20%.

According to Coinglass data, $808 million was liquidated across the network in the last 24 hours, with $705 million in long positions liquidated. Meanwhile, cryptocurrency-related stocks in the U.S. saw expanded declines in after-hours trading, with CleanSpark down over 20%, MicroStrategy and Marathon Digital down over 16%, and Coinbase and Riot Platforms down over 13%.

After BTC broke through $70,000 at the end of July, it failed to reach a new all-time high. With funds dwindling, what factors accelerated the massive crash in the cryptocurrency market?

Non-Farm Data Raises Concerns of U.S. Recession

Last Friday, the U.S. non-farm payroll data was unexpectedly lower than expected, triggering a series of chain reactions on Wall Street. The weak performance of this key economic indicator not only led to a sharp decline in U.S. stocks but also sparked widespread concerns about the U.S. economic outlook. As an important measure of the health of the U.S. economy, the unexpected performance of non-farm data caused turbulence in financial markets, with the U.S. unemployment rate soaring 0.6% from its low this year. After months of exceeding expectations, the unemployment rate finally triggered the "Sam Rule," which predicts a recession based on unemployment rates.

This rule states that when the 3-month moving average of the U.S. unemployment rate rises more than 0.5 percentage points relative to the lowest point in the past 12 months, a recession may begin. This rule has had a 100% accuracy rate since the 1970s. After the July unemployment data was released, it reached the 0.5% threshold, indicating that the U.S. may have already entered a recession. Since 1950, of the 11 signals issued by the Sam recession indicator, only the recession in 1960 occurred 5 months later; the other 10 signals indicated that the U.S. was already in a recession.

Goldman Sachs Chief Economist Jan Hatzius raised the probability of the U.S. entering a recession in the next year from 15% to 25%. Goldman Sachs expects the Federal Reserve to cut interest rates by 25 basis points in September, November, and December. Additionally, Goldman stated that if its predictions are wrong and the August employment report is as weak as July's, a 50 basis point rate cut in September is very likely. In contrast, JPMorgan and Citigroup have adjusted their forecasts, expecting the Federal Reserve to cut rates by 50 basis points in September.

Market participants who believe in the recession narrative will choose to sell their assets, as this group is unwilling to bet on whether a recession will actually occur, leading to negative impacts on the cryptocurrency market as funds are withdrawn.

Global Stock Markets Plunge in Panic

The day after the Federal Reserve's interest rate meeting, U.S. stocks began to plummet. The most immediate cause was the ISM manufacturing data for July, released on August 1, which came in at only 46.8%, below previous market expectations. This index reflects the state of U.S. factory activity and is widely regarded as a signal of economic activity contraction.

Subsequently, the non-farm payroll data released on Friday further intensified investors' concerns, showing that the U.S. unemployment rate rose to 4.3% in July, the highest level since 2021. Combined with the previous day's report of initial jobless claims reaching their highest level since August 2023, it indicates that the U.S. job market is showing clear signs of slowing down. U.S. stock futures collectively fell, with the Nasdaq 100 futures down 2.21% and the S&P 500 futures down 1.23%.

Today, Asian markets were also affected by the U.S. stock market, starting to decline. The Japanese stock market plummeted, with the Nikkei 225 index down 6%, accumulating a drop of over 12% in three days. The Tokyo Stock Exchange index fell, triggering a circuit breaker, having retreated 20% from its July peak, poised to enter a technical bear market. Banking, finance, and mining stocks led the decline. The South Korean KOSPI index's decline expanded to 5%, with Samsung's stock price dropping by 6%, marking its largest decline since 2020. The Singapore Straits Times index's decline expanded to 3%, the Australian S&P 200 index fell by 3%, and the Philippine stock index's decline expanded to 2%.

Large Liquidations in the Crypto Market Accelerate Decline

On June 20, rumors circulated that Jump Trading was being investigated by the U.S. Commodity Futures Trading Commission (CFTC). Just four days later, Jump Crypto President Kanav Kariya announced his resignation on social media without specifying the reason. Recently, Jump Trading redeemed $410 million worth of wstETH (120,000 tokens) in batches for ETH and transferred it to exchanges like Binance and OKX. In the past 24 hours, Jump Trading transferred another 17,576 ETH (approximately $46.78 million) to centralized exchanges. According to Scopescan monitoring, Jump's positions are now dominated by USDC and USDT.

BitMEX co-founder Arthur Hayes recently posted on social media that he learned through traditional financial channels that a "big player" had collapsed and sold all their crypto assets. This so-called "big player" is likely Jump Trading.

Additionally, the market saw multiple large liquidations and on-chain liquidation events today due to severe selling pressure causing prices to continuously drop. In the morning, four whales had their leveraged positions liquidated due to the rapid market decline, totaling 14,653 ETH, valued at approximately $33.54 million. According to Parsec data, over the past 24 hours, the liquidation volume on DeFi lending exceeded $320 million, setting a new high for the year.

Centralized exchanges also reported large liquidations, with a Binance user experiencing a single long position liquidation of $10.9074 million at 10:17 AM when Ethereum was priced at $2,197, with the trading pair being ETH/USDC.

As the market continues to liquidate leverage, it has also increased selling pressure, leading to a significant decline in the cryptocurrency market.