The sharp drop in prices of both cryptocurrencies and stocks over the past few days can be attributed to a combination of macroeconomic and crypto-specific factors, although the former seem to be more influential at the moment. This was stated by the regional head of Binance in CEE, Central Asia and Africa, Kyrylo Khomyakov.
WHY DID BITCOIN FALL?
From a macroeconomic perspective, last week was marked by significant volatility on Wall Street. Major indexes and stock market futures fell sharply by the end of the week on growing fears of a recession. Those fears were heightened after Friday’s US jobs report raised concerns about the strength of economic growth.
In addition, ongoing geopolitical tensions have contributed to market uncertainty and volatility.
Speaking specifically to cryptocurrencies, the general market sell-off triggered by recession fears has led to a reallocation of capital away from high-risk assets, which still include digital currencies.
The move was fueled by recent dynamics in the US presidential race, which some market participants see as less favorable for cryptocurrencies as an asset class.
Finally, in the crypto market, the summer months have historically been slower than other months of the year, with consistently lower revenues. Perhaps these seasonal dynamics also play a role.
“Despite these challenges, we do not see this as a sign of a long-term negative trend for the crypto market,” — noted Khomyakov.
The Federal Reserve is expected to cut interest rates in September, which should improve the outlook for the US economy.
In addition, with the presidential election still to come, there remains considerable potential for market volatility. As the election nears, we’re likely to see market impact in both directions as candidates clarify their positions on cryptocurrencies.
As recently as August 2, bitcoin traded above $65. The rate began to fall sharply on Sunday, August 4. At around 17:15 the price dropped below $60k, around 5:00 BTC was already trading at $51k, and after 9:30 the rate slipped to $49k before paring back the fall.
Ethereum fell even more. “Ether” lost about 24% in price in a day, more than 33% in a week. Some cryptocurrencies from the top 100 by capitalization lost more than 50% in price overnight.
