Bitcoin and crypto markets are currently experiencing one of their worst days since the FTX collapse in November 2022. On Binance, Bitcoin has dropped to $49,000, marking a massive 15% collapse over the past 24 hours. Similarly, Ethereum is down 20.4%, Binance Coin (BNB) is down 20.0%, Solana (SOL) is down 18.4%, and XRP is down 17.4%.
Cryptocurrency market crash is less dangerous
However, macroeconomic and cryptocurrency analyst Alex Krueger believes conditions could be worse. analysis He believes that the severity of the collapse is not due to internal factors in the cryptocurrency market, but to broader macroeconomic policies, highlighting in particular the contradictory monetary policies pursued by the US Federal Reserve and the Bank of Japan.
“It’s clear that this disaster is driven by macroeconomics, not crypto specifically. It’s becoming clear that the main driver is not the collapse of the US economy (recession talk spiked after last Friday’s payrolls data). It seems that the policy mistake was not that the Fed didn’t cut rates fast enough, but that the Fed didn’t cut rates while Japan was raising interest rates. That’s clearly in the past, and we now need US economic data to confirm that,” Krueger explained.
Pointing to the correlation between the market sell-off and specific global financial events, he said: “The chart shows where the sell-off started last week. On Wednesday, right after the FOMC meeting. Right when the Nikkei opens.” Krueger went into more detail about why the situation could be worse. On the nature of the financial crisis, he said: “A financial crisis driven primarily by a series of Japanese speculators exploiting debt is a much better alternative to a financial crisis driven by the United States going into recession.”
Krueger also emphasized the critical nature of upcoming U.S. economic data, especially labor market indicators. “When it comes to U.S. data, the focus is now on the labor market, so pay particular attention to Thursday’s initial jobless claims (which is generally not a market-moving data), as well as state employment data (which provides detailed state-level employment data, something markets rarely pay much attention to), which will be released on August 16.”
The analyst suggested the situation could be more serious, attributing the relatively limited fallout to the fact that the overall economic slowdown was not caused by a hard landing scenario. “By the way, it’s not about sugarcoating the picture. What’s lost is lost. The charts are REKT. But we don’t really want to go into a hard landing scenario. I still don’t see that in the data,” he said.
In addition to the speech, prominent crypto trader on X, Daan Crypto Trades (@DaanCrypto), subscriber “His view on the potential market recovery dynamics is reminiscent of past market corrections. “It will be interesting to see how well the muscle memory of 2020 is baked into the average market participant. Buying the blood of the Covid crash when stimulus kicked in was probably one of the best trades of the past decade across all markets.”
But as Dan emphasizes, there is no guarantee that history will repeat itself. “I wonder if market participants, having learned this, are more willing to go down this path, having seen how well things worked just four years ago. I’m not saying that’s the scenario, but I’m curious to see what happens. Let’s first see if central banks are willing to step in soon.”
At the time of publishing this report, BTC was trading at $51,927.
Featured image by Shutterstock, chart by TradingView.com