Bitcoin
Why is crypto crashing right now?
Published
2 months agoon
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adminWhat are the immediate global triggers that have led to this massive crypto market crash? Read on
The crypto market has crashed brutally, sending shockwaves through the financial world. As of August 5, the global crypto market cap stands at $1.81 trillion, a staggering 15.88% decrease in just one day, triggering extreme panic and strong indications of a bear market.
Bitcoin (BTC) has plummeted over 25% in the last seven days, with nearly 15% of that decline occurring in the last 24 hours, trading at $51,300 levels as of August 5.
Ethereum (ETH) has fared even worse, falling by 32% in the last week and over 21% in the past day, trading at $2,238 levels as of this writing.
Other altcoins have been hit hard, too, dropping between 40-50% over the week and 15-25% in the last 24 hours.
The turbulence isn’t limited to the crypto market. Major global stock indices like NASDAQ100 (U.S.), FTSE100 (UK), and NIFTY50 (India) have seen sharp declines of 2-3% in a single trading session.
Japan’s Nikkei225 took the worst hit, plunging nearly 14% in one day, marking its steepest decline since 1987.
So, why is crypto crashing right now? What are the global triggers causing this widespread panic and dragging down all financial markets? Let’s delve into the underlying reasons behind this market turmoil.
What happened to crypto market: decoding the factors
U.S recession fears
The crypto market’s recent crash isn’t happening in isolation. The U.S. job market is showing signs of trouble, which is fueling fears of a recession.
According to data released on August 2, the unemployment rate jumped to a nearly three-year high of 4.3 percent in July, up from 4.1 percent in June and a stark increase from a five-decade low of 3.4 percent in April last year.
Economists from Goldman Sachs have increased the probability of a recession in the U.S. next year to 25 percent from 15 percent, Bloomberg reported.
Despite this, they noted there are “several reasons not to fear a slump,” even with the jump in unemployment. According to Goldman economists, ‘The economy continues to look fine overall, there are no major financial imbalances and the Fed has a lot of room to cut interest rates and can do so quickly if needed.’
However, there are also concerns that the Federal Reserve may have “waited too long” to cut interest rates. The Goldman report suggests that if job growth recovers in August, a 25 basis points (bps) cut would be sufficient to address any downside risks. But if the August employment report is as weak as July’s, a 50 bps cut might be necessary in September.
The rising unemployment and potential recession fears are creating a ripple effect. Investors are becoming more risk-averse, moving away from volatile assets like crypto, leading to massive sell-offs in the crypto space.
When people fear a recession, they tend to sell off riskier investments and hold onto safer assets like cash, gold, or government bonds.
Nikkei 225 crash
Japan’s financial system is undergoing some critical changes, and these shifts are having a ripple effect on markets worldwide.
On July 31, Japan’s central bank raised its benchmark interest rate to “around 0.25%” from its previous range of 0% to 0.1%. This was the second time this year that the Bank of Japan (BoJ) increased rates, the first being on March 19, marking the first rate hike since 2007.
While this move is aimed at benefiting Japan’s economy, it has an adverse impact on carry trade, a popular strategy among forex traders and fund managers.
Carry trade involves borrowing money in a currency with a low-interest rate and investing it in assets that offer higher returns. When Japan raises its interest rates, it makes the yen more attractive for borrowing, disrupting this strategy and causing global financial adjustments.
The effect of Japan’s rate hike was immediately felt. The Nikkei 225 stock index plunged 12.4% on August 5, marking a widespread sell-off.
One of the factors driving the BoJ to raise rates was the prolonged weakness in the Japanese yen, which has pushed inflation above the central bank’s 2% target.
Early on August 5, the dollar was trading at 142.59 yen, down from 146.45 late Friday and sharply below its level of over 160 yen a few weeks ago.
The market sell-off in Japan is not occurring in isolation. Stocks began tumbling globally on August 2 after weaker-than-expected data on U.S. jobs sparked worries that high interest rates might push the U.S. economy into a recession.
This anxiety is compounded by Japan’s rate hike, which adds another layer of complexity to the global financial picture.
The current scenario, where both U.S. and Japanese markets are showing signs of stress, is causing investors to reassess their positions. As a result, there is a massive sell-off in riskier assets, including cryptocurrencies.
Geopolitical woes
Geopolitical tensions are another major factor impacting the crypto market. On August 3, tensions in the Middle East escalated as Iran and its allies prepared their response to the assassination of Hamas leader Ismail Haniyeh in Tehran, an act they blamed on Israel.
This followed the killing of Hezbollah’s military chief in Beirut, prompting vows of vengeance from Iran and the ‘axis of resistance’, which raised fears of a regional war.
Meanwhile, the U.S., an ally of Israel, announced it would move warships and fighter jets to the region. Western governments urged their citizens to leave Lebanon, where the powerful Iran-backed Hezbollah movement is based, and airlines canceled flights.
Iran-backed groups from Lebanon, Yemen, Iraq, and Syria have already been drawn into the ongoing conflict between Israel and the Palestinian militant group Hamas in Gaza.
The fear of a regional war and its potential global implications can lead to massive sell-offs in the crypto market as investors seek stability. Geopolitical instability often causes heightened volatility in both traditional and crypto markets.
What’s next?
As the crypto market continues to tumble, let’s explore the insights of some prominent figures in the industry and analyze their perspectives on the situation.
Alex Krüger, a well-known macroeconomist, suggests that the current debacle is driven more by macroeconomic factors rather than issues specific to crypto.
Krüger argues that the policy mistake wasn’t the Fed not cutting rates quickly enough, but rather the Fed not cutting rates while Japan hiked theirs, creating a financial crisis spurred by levered Japanese speculators, which, according to him, is a less severe scenario than a crisis caused by a U.S. recession.
Meanwhile, Justin Sun, the founder of Tron (TRX), remains optimistic despite the market downturn. He suggests that the industry has grown over the past year and that the current market fluctuations aren’t due to negative news.
In these turbulent times, you should exercise caution and stay informed. Diversify your portfolio to mitigate risks and avoid putting all your eggs in one basket.
Consider setting stop-loss orders to protect your investments from further decline. Don’t make impulsive decisions based on fear or market hype, and never invest more than you can afford to lose.
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Bitcoin on the Cusp of Breakout Into Parabolic Phase, Says Crypto Analyst – Here’s the Timeline
Published
8 hours agoon
September 19, 2024By
adminA cryptocurrency analyst and trader is saying Bitcoin (BTC) is on the verge of entering a bullish phase over the coming weeks and months.
The analyst pseudonymously known as Rekt Capital tells his 88,100 YouTube subscribers that Bitcoin is “on the cusp of a breakout into the parabolic phase” after spending the past few months in a re-accumulation phase.
According to Rekt Capital, Bitcoin’s parabolic phase lasts a predictable amount of time in every cycle.
“So if we just see that 160 days after the halving is how long this re-accumulation phase lasts and we tend to see a bull market peak 550 days after the halving, then this parabolic phase should last 390 days or so, 400 days or so.
So it is roughly a year of parabolic upside that we see going into the bull market peak. And if that continues, indeed mid-September 2025, mid-October 2025 is when we would see a bull market peak occur for Bitcoin.”
Bitcoin is trading at $59,958 at time of writing, about 19% below the all-time high of approximately $73,800.
The pseudonymous analyst says that based on historical precedent, Bitcoin could hit a new all-time high over the coming days.
“…but we will reverse towards the upside at some point. And that point is coming quite soon because 160 days after halving is when we see a breakout to new highs.”
The Bitcoin halving occurred around 151 days ago on April 20th.
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Hut 8 deepens Bitmain partnership with launch of new ASIC miner in 2025
Published
9 hours agoon
September 19, 2024By
adminBitcoin miner Hut 8 is expanding its partnership with Bitmain to introduce a new ASIC miner with direct liquid-to-chip cooling, set to deploy in Q2 2025.
Miami-headquartered crypto mining firm Hut 8 has expanded its partnership with Bitmain, announcing the upcoming launch of the U3S21EXPH, a next-generation ASIC miner capable of reaching up to 860 TH/s.
In a Sept. 19 press release, the company the miner, which is scheduled for deployment in Q2 2025, is the first mass-commercialized ASIC model to feature direct liquid-to-chip cooling in a U-form factor.
“We believe this model represents a more thoughtful approach to capturing the lucrative economics offered by next-generation machines, reducing upfront capital requirements while we continue to pursue growth initiatives in AI infrastructure.”
Asher Genoot, Hut8 chief executive officer
Under the hosting agreement, Hut 8 has the option to purchase all or a portion of the hosted miners in up to three tranches at a fixed price within six months of deployment. If Hut 8 exercises the option in full, the company’s self-mining hashrate is expected to increase from 5.6 EH/s to 20.6 EH/s, the press release reads.
The agreement is designed to minimize upfront capital expenditures and provide flexibility for future purchases, allowing Hut 8 to assess market conditions “before committing additional capital,” per the document.
The news comes after Hut 8 secured a $150 million investment in June from Coatue Management to accelerate its artificial intelligence infrastructure development. At the time, Hut 8 said the investment was made as “many traditional data center operators are failing to meet the surging demand for AI compute capacity due to power shortages.”
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Bitcoin
Louisiana State Government Now Accepts Bitcoin Lightning As Payment
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adminLouisiana State Treasurer, John Fleming, M.D. has announced that the state government will now accept Bitcoin, Bitcoin Lightning Network, and USD Coin, as a valid form of payment for state services. The first cryptocurrency payment was made to the Louisiana Department of Wildlife and Fisheries today.
Dr. Fleming, described this initiative as a crucial step in modernizing government operations, stating, “In today’s digital age, government systems must evolve and embrace new technologies. By introducing cryptocurrency as a payment option, we’re not just innovating; we’re providing our citizens with flexibility and freedom in interacting with state services.”
The Bitcoin payments will be converted into U.S. dollars by Bead Pay, a provider specializing in cryptocurrency conversion for government transactions. “The State of Louisiana will not handle cryptocurrency,” clarified the announcement. This system aims to ensure that the state is protected from the volatility commonly associated with digital currencies. The conversion process mirrors that of credit or debit card payments, minimizing risks while offering secure, efficient transactions.
Louisiana’s shift to accepting Bitcoin is a part of a broader effort to integrate new technologies into public services. “I have been proud to author several bills related to digital assets and to Chair the State Treasurer’s task force in 2022,” said Louisiana State Representative Mark Wright. “I’m excited to see Louisiana further expanding its payment options under Treasurer Fleming. I look forward to working with him and others so that Louisiana will continue to be a leader in accepting digital payments.”
Louisiana expects the new payment options to reduce fraud and enhance overall transaction security. Residents can now use their private Bitcoin wallets to pay for services, while the state continues to receive payments in U.S. dollars.
The Louisiana Department of Wildlife and Fisheries was the first state agency to adopt the new payment system, with more departments expected to follow. “Offering our sportsmen more ways to interact with our department allows for us to enhance our customer service,” stated Secretary Madison Sheahan of the Louisiana Department of Wildlife and Fisheries. “This is another step towards our goal of creating a modern and professional organization that better serves the sportsmen of the state.”
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