Monthly Crypto Market Review - August 2024

Published on: Sep 02, 2024|6 min read

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London: 2 September 2024 (TraderMade): August 2024 was a turbulent yet transformative month for the cryptocurrency market. It is characterized by extreme volatility, significant macroeconomic shifts, and pivotal developments within the crypto ecosystem.

The month began with widespread fear of a US recession, triggering a brutal crash across global markets. Despite the initial downturn, the latter part of August saw the market stabilize, buoyed by institutional interest and favourable regulatory signals, setting the stage for a potential recovery.

Key Takeaways

August 2024 saw significant market volatility due to recession fears and macroeconomic shifts, but Bitcoin and institutional interest remained strong.
Regulatory clarity and key legal resolutions provided a more stable foundation for future crypto market growth.

Recession Impact

The month kicked off with heightened fears of a US recession, which rattled global markets and led to one of the most severe market crashes in recent history. Equities began a selloff that extended into the crypto market, causing a sharp decline in Bitcoin's price.

The unwinding of the long-standing Japanese Yen exacerbated the selloff carry trades, a financial strategy that had exposed the global financial system to substantial risk. With interest rates in Japan poised to rise and US recession fears mounting, the liquidation of these trades unleashed massive selling pressure, impacting Bitcoin and other risk assets.

Institutional Confidence

Despite the market downturn, Bitcoin's Open Interest hit a record $39.4 billion, surpassing the previous all-time high (ATH) set in March. This surge in Open Interest, alongside on-chain data indicating that whales had accumulated over $23 billion worth of Bitcoin, reflected underlying confidence in the cryptocurrency's long-term value.

Institutional adoption also gained momentum, with Goldman Sachs revealing a $419 million stake in spot Bitcoin ETFs and BlackRock and Fidelity's Bitcoin ETFs ranking among the top 15 global ETF inflows. These developments underscored the growing institutional interest in Bitcoin, even amidst market volatility.

Regulatory Developments

August saw significant regulatory and legal developments that could shape the future of the crypto industry. The SEC dropped its requests to label Solana (SOL), Cardano (ADA), and Polygon (MATIC) as securities, providing much-needed clarity for these assets.

In another major legal resolution, Ripple (XRP) was ordered by the SEC to pay $125 million in penalties, officially concluding a years-long lawsuit that had cast a shadow over the cryptocurrency. Additionally, Senator Chuck Schumer promised a comprehensive crypto bill in 2024 if Kamala Harris wins the upcoming US presidential election, signalling potential regulatory support for the industry.

Macro-Economic Shifts

Central banks played a crucial role in shaping market dynamics throughout August. The Bank of England cut interest rates for the first time in four years, while the Bank of Japan raised its rates to 0.25%, contributing to the unwinding of the massive 20 trillion Yen carry trades.

In the United States, the Federal Open Market Committee (FOMC) held rates steady. Still, Fed Chair Jerome Powell hinted at possible rate cuts in September, particularly after reaffirming the Reserve's commitment to a 2% inflation target at the Jackson Hole symposium.

These dovish signals from central banks provided some relief to markets, helping to stabilize prices towards the end of the month.

Socio-Political Developments

Geopolitical tensions and socio-political developments also played a significant role in August. The arrest of Telegram founder Pavel Durov in France, coupled with the subsequent 14% drop in The Open Network (TON) crypto, highlighted the vulnerability of crypto assets to political events.

In the US, the political landscape grew increasingly intertwined with the crypto market, as former President Trump suggested accumulating Bitcoin to help pay off the country's $35 trillion debt. At the same time, the Trump Organization announced the launch of a crypto real estate initiative.

On the other side of the political spectrum, Kamala Harris, the Democratic nominee, surpassed Trump in betting odds, with her campaign raising $540 million since Biden stepped out of the race. Harris's potential presidency was viewed positively by the crypto community, particularly after she expressed intentions to "reset" relations with the crypto space.

Technical Analysis

As the month progressed, the crypto market began to recover from its earlier losses. Bitcoin managed to bounce back from the lows around $50,000, breaking out of a wedge pattern and trending towards the $66,000 level.

BTCUSD Chart

This recovery was supported by the dovish stance of the Fed and the anticipation of upcoming rate cuts. However, market participants remained cautious, keeping a close eye on geopolitical risks, particularly in the Middle East, where escalating tensions could pose further challenges.

Ethereum (ETH), while initially taking a bigger hit than Bitcoin, also saw some recovery. Despite being structurally short-biased against Bitcoin due to the upcoming US election and the potential for a Strategic Reserve bill, Ethereum's technical setup indicated the potential for a move higher, especially if geopolitical risks subsided.

ETHUSD Chart

Spot and Derivatives

Throughout August, spot and derivatives market activity reflected the broader market sentiment. The spot desk saw continued demand for Bitcoin and Ethereum, with some profit-taking observed as prices recovered.

Altcoin activity remained subdued, although there was notable interest in newly launched assets like L3. The derivatives desk reported relatively stable basis rates for Bitcoin and Ethereum, with options pricing showing a bias towards increased volatility.

As macroeconomic factors dominated the landscape, the derivatives market presented opportunities for traders to hedge against potential risks or capitalize on expected volatility.

Key Developments

Fears of a US recession triggered a significant global market crash, impacting the crypto market heavily.
Bitcoin's Open Interest hit a record $39.4 billion, reflecting strong institutional interest despite the downturn.
SEC dropped requests to label Solana, Cardano, and Polygon as securities, providing regulatory clarity.
Ripple (XRP) resolved its long-standing lawsuit with the SEC, paying $125 million in penalties.
Goldman Sachs revealed a $419 million stake in spot Bitcoin ETFs, bolstering institutional adoption.
Fed Chair Jerome Powell hinted at possible rate cuts, providing some relief to the markets.
Kamala Harris surpassed Trump in US presidential betting odds, with her campaign raising $540 million.
Bitcoin recovered from early losses, trending towards $66,000, supported by institutional interest and positive macro signals.

Conclusion

August 2024 was a month of extremes for the crypto market, marked by a sharp initial downturn followed by a gradual recovery. The interplay of macroeconomic factors, regulatory developments, and geopolitical events created a complex landscape for market participants.

However, the resilience shown by Bitcoin and other major cryptocurrencies, coupled with growing institutional interest, suggests that the market is well-positioned for potential gains in the coming months. As the market looks ahead to September, key factors to watch include: