The butterfly effect of the yen interest rate hike collapses the global market, and the crypto market may enter a recovery uptrend | Matrixport Market Observation

Market Trends

In the past week, BTC has fallen from above $66,000, breaking through the key support levels of $65,000 and $60,000 on August 1 and August 4, respectively, and entering a panic sell-off on August 5. Binance spot data shows that on August 5, BTC's maximum daily drop was 17%, with BTC briefly falling to $49,000. Due to the extreme volatility, over 200,000 people were liquidated on August 5, with liquidation amounts exceeding $1 billion. As of the time of writing, BTC's price has gradually rebounded and stabilized around $55,000.

Along with the decline in BTC's price, other crypto assets have generally followed suit. ETH even showed signs of leading the decline. On August 5, ETH's maximum daily drop reached 23.85%, touching $2,111, close to its lowest point since the beginning of 2024. As of the time of writing, ETH's price is fluctuating around $2,500.

Market Analysis

This extreme market situation is mainly influenced by several factors, with macroeconomic factors clearly leaning towards bearishness, liquidity crunch leading to consecutive market crashes; increased regulatory pressure on cryptocurrencies amplifying panic selling in the crypto market, etc.

Japan's Interest Rate Hike and Balance Sheet Reduction, Global Capital Carry Trade Reversal

The long-term weakness of the yen has provided liquidity for global capital carry trades, and the market expects the Bank of Japan to raise interest rates multiple times. The Bank of Japan's interest rate hike and balance sheet reduction operations have caused the yen's exchange rate to soar, forcing global capital to deleverage and sell various assets to repay yen-denominated debts. At the same time, most large Japanese companies are export-oriented, and the soaring yen has also led to a decline in profits for these large enterprises, creating a clear bearish sentiment. The U.S. stock market is particularly affected by the yen's exchange rate and is also the most impacted by asset sell-offs.

Cumulative Risk Factors of U.S. Economic Recession, Market Sentiment Deteriorates

Last week's non-farm payroll data significantly underperformed expectations, with the unemployment rate soaring to 4.3%. The S&P 500 index fell to its lowest point since October 2022 (data from August 5) following the weak employment data. The U.S. labor market is increasingly weakening, with Goldman Sachs raising the risk of a U.S. economic recession next year from 15% to 25%. Market concerns about the Federal Reserve's monetary tightening cycle leading to an economic recession have intensified. Additionally, the worsening situation in the Middle East has increased geopolitical instability, and the earnings reports of major tech companies released last week did not provide a boost to the market.

Market Selling Pressure, JUMP May Be Selling Assets Under Regulatory Pressure

Since yesterday, rumors have spread in the market that JUMP is selling ETH. Information indicates that Jump Trading has redeemed 83,000 wstETH for 97,500 ETH over the past nine days since July 25. Among these, 66,000 ETH (approximately $191 million) has already entered trading platforms. This information has intensified market panic, leading to continuous price drops for ETH, with the entire crypto market experiencing liquidation amounts exceeding $1 billion yesterday. The market's liquidation has further exacerbated selling pressure, causing a downward spiral.

Recent Highlights

Harris Nominated as Democratic Presidential Candidate, Meeting to Repair Crypto Relations Postponed

U.S. Vice President Harris has officially received the Democratic presidential candidate nomination, becoming the first Black woman and Asian American to lead a major U.S. political party's presidential ticket. This election has officially turned into a showdown between Harris and Trump. The meeting to repair crypto relations that Harris will attend has been postponed to later this week.

Reserve Bank of Australia Keeps Interest Rates Unchanged at 4.35%, In Line with Market Expectations

The Reserve Bank of Australia is determined to restore the Consumer Price Index (CPI) to target levels and must remain vigilant against inflationary risks. Inflation remains above target, showing persistence. Core inflation levels are still too high, and necessary measures will be taken to achieve inflation targets. Additionally, core inflation is expected to slow down more gradually than previously anticipated, projected to fall below 3% by the end of 2025. The forecasts for GDP growth, unemployment rate, and core inflation have also been revised upward.

Suggested Layout

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Disclaimer: The above content does not constitute investment advice, sales offers, or purchase offers to residents of the Hong Kong Special Administrative Region, the United States, Singapore, or other countries or regions where such offers or invitations may be prohibited by law. Digital asset trading may involve significant risks and volatility. Investment decisions should be made after careful consideration of personal circumstances and consultation with financial professionals. Matrixport is not responsible for any investment decisions made based on the information provided herein.