Meme Coin Culture: Do Traders Really Mind Getting Scammed?
July 23, 2024
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In the dynamic world of cryptocurrency, particularly within the meme…
Crypto Market Turmoil: Analyzing the Causes Behind the Recent Crash
Beyond the exhaustion of positive news in the crypto market, a shadow has been cast over the market due to the plunge in U.S. stocks, the ongoing uncertainty around Federal Reserve rate cuts, and U.S. presidential candidate Kamala Harris’ lack of stance on cryptocurrencies.
Just two days after the official trading of Ethereum spot ETFs began, the market faced a significant downturn. Interestingly, Ethereum, which had previously risen on positive news, saw a sharper decline than BTC and SOL after the good news dried up. ETH fell below $3,200, with a 24-hour drop of over 8%, and Ethereum ecosystem tokens also experienced notable declines. Bitcoin briefly fell below $64,000, dropping by 3%, and SOL fell by 2%. In the past hour, there have been $113 million in liquidations across the network, with long positions accounting for $108 million and short positions for $4.225 million.
Ki Young Ju, founder and CEO of CryproQuant, stated that after Mt. Gox repaid creditors, there were no out-of-the-ordinary fluctuations in BTC spot trading volume or platform inflow/outflow on the Kraken platform, suggesting that the BTC downturn was likely driven by market sentiment rather than actual selling.
So, if the Mt. Gox sell-off did not occur, what macroeconomic negative factors are affecting capital flows?
U.S. Stock Crash Drags Down Global Risk Assets
Tesla and Google’s earnings fell short of expectations, triggering pessimism over an AI bubble and dragging down the NASDAQ and S&P 500 by 3.64% and 2.31%, respectively. This marked the largest single-day drop since late 2022, plunging U.S. stock indices across the board, with the Dow Jones falling by 500 points, small-cap indices by 2.1%, chip stock indices by 5.4%, and Chinese concept stock indices by nearly 2%.
Tech giants’ total market value shrank by nearly $1.75 trillion compared to their peak ten days ago. Tesla plummeted by 12.33%, marking its largest single-day drop since September 2020. Nvidia fell by 6.8%, Meta by more than 5.6%, Google by 5.04%—its largest drop in half a year since the end of January, Microsoft by approximately 3.6%, Amazon by about 3%, and Apple by about 2.9%.
As U.S. stocks and other risk assets performed poorly, global investors’ risk aversion intensified. As cryptocurrencies are highly liquid assets, they inevitably were also impacted, leading to capital outflows and a subsequent drop.
Interest Rate Cuts Imminent, But Still Pending Data
Crypto risk assets are significantly affected by Federal Reserve interest rates. When the Fed officially announces rate cuts, capital will continuously flow out in search of more profitable assets, thus driving up prices for stocks and cryptocurrencies alike.
There’s a strong market call for immediate rate cuts.
William Dudley, the former chairman of the New York Fed who enjoys permanent voting rights on the FOMC and is regarded as the third most influential figure in the Fed, stated today: “I have long stood in the camp of ‘keeping interest rates high for a longer period’ to control inflation, keeping short-term interest rates at current or higher levels. But now things have changed, so I’ve changed my mind. The Fed should cut interest rates, preferably at the rate meeting next week.”
However, the market currently estimates that the earliest rate cuts might only occur in September, not sooner.
In the first half of this year, strong inflation trends and robust employment data made the Fed more concerned about inflation risks, continually disappointing market expectations for rate cuts. Entering the second half of the year, with the fading of secondary inflation risks and rising unemployment rates (4.1%), the Fed’s risk management stance gradually shifted towards “growth risks.”
Even if rate cuts are desired by September, there are still several processes to undergo, and economic data released before the meeting must meet Fed officials’ forecasts, indicating softening inflation, employment, and growth to support rate cuts.
Thus, immediate Fed rate cuts still face significant uncertainty.
U.S. Presidential Candidate Kamala Harris’ Ambiguous Crypto Stance
U.S. President Joe Biden today announced his withdrawal from the 2024 presidential race in a speech, choosing to focus on fulfilling his presidential duties for the remainder of his term. Kamala Harris has officially become a strong contender against Trump.
Although participants in the prediction market Polymarket forecast Trump’s chances of winning the election at 62% and Harris at 36%, a recent Reuters poll shows Harris with a slight lead (44%) over Trump (42%).
Harris was also confirmed by the CEO of Bitcoin Magazine not to be speaking at the upcoming Bitcoin 2024 conference. Compared to Trump’s many crypto-related views, Harris has never commented on the crypto industry nor taken an official stance on cryptocurrencies to date. Financial disclosures show that neither Harris nor her husband has ventured into the crypto space.
The only indirect connection is that during the 2020 election, Harris hired Montoya, the former CTO of the NBA’s Sacramento Kings, who made the Kings the first global team to accept Bitcoin and also launched NFTs. Montoya currently serves as a Presidential Assistant at the White House, responsible for scheduling, so it’s unlikely that his policies will have much influence.
Disclaimer: The projections and information presented here are for educational purposes only and should not be considered financial advice. CoinGrab.Asia assumes no responsibility for any losses resulting from the use of this data. Readers are encouraged to perform their own research and proceed cautiously before engaging in any related activities.
