Weekly Crypto Market Wrap: Crypto Market Turmoil Amid Economic Fears

London: 7 August 2024 (TraderMade): The past week in the crypto market has been marked by significant volatility and notable developments. Global economic concerns, regulatory decisions, and central bank actions have all played pivotal roles in shaping market dynamics.

Key Takeaways

• Market Volatility: Global fears of a US recession and central bank decisions have caused significant market fluctuations.
• Bitcoin Open Interest: Record highs indicate strong market engagement despite economic uncertainties.
• Regulatory Relief: The SEC dropping requests against SOL, ADA, and MATIC has eased regulatory pressures.
• Strategic Shifts: Notable endorsements and institutional moves suggest shifting perceptions and strategies around crypto investments.

Fears of US Recession Rattle

The past week has been tumultuous for global markets, with fears of a looming US recession sparking a significant selloff. The crypto market wasn't spared, experiencing substantial declines amidst broader economic concerns.

Bitcoin Open Interest Hits Record

Bitcoin's open interest surged to a record $39.4 billion, surpassing its previous all-time high from March. This increase highlights heightened market activity and investor interest despite the ongoing market turbulence.

SEC Drops Requests

In a positive turn for the crypto industry, the SEC has withdrawn its requests to classify Solana (SOL), Cardano (ADA), and Polygon (MATIC) as securities. This decision alleviates regulatory pressures on these projects, potentially paving the way for further development and adoption.

TRON (TRX) Surpasses Ethereum

TRON (TRX) has achieved a notable milestone by surpassing Ethereum in 7-day revenue statistics. This achievement underscores TRON's growing prominence and effectiveness in generating revenue within the blockchain ecosystem.

Bitcoin to Address US Debt

In a bold statement, former President Donald Trump suggested that accumulating Bitcoin could help address the US’s $35 trillion debt. This proposal adds a new dimension to the ongoing discussion about cryptocurrency’s role in national economic strategies.

Bitcoin and Ethereum Launch

Hong Kong's largest broker has launched Bitcoin and Ethereum trading services, making these cryptocurrencies available to its 22 million users. This move significantly expands the accessibility and potential adoption of crypto assets in the region.

Telegram Blockchain Adoption

Trust Wallet has partnered with The Open Network (TON) to advance the adoption of the Telegram blockchain. This collaboration aims to enhance the integration and usability of blockchain technology within the Telegram ecosystem.

Bank of England Cuts Rates

For the first time in four years, the Bank of England has cut interest rates, responding to economic pressures and aiming to stimulate growth. This decision reflects the broader trend of central banks adjusting monetary policies amidst economic uncertainties.

FOMC Holds Rates Steady

The Federal Open Market Committee (FOMC) decided to hold rates steady, with Fed Chair Jerome Powell indicating a possible rate cut in September. This announcement adds to the cautious optimism about future economic policy adjustments.

Jolts Report

The latest Jolts report revealed a sharper-than-expected decline in available US jobs, coupled with jobless claims reaching one-year highs. These indicators suggest growing economic challenges and labor market pressures.

BoJ Raises Interest Rates

Unlike other central banks, the Bank of Japan raised interest rates to 0.25%. This move signifies Japan's unique economic stance and the country's approach to managing inflation and economic stability.

Technicals & Macro

BTCUSD

Last week, dreams of all-time crypto highs faded alongside almost every other market on the globe. Friday saw equities begin the selloff, which spilled into weekend risk assets, including crypto. Monday is an absolute bloodbath. What we are seeing is one giant carry trade unwind.

For decades, investors have relied on low interest rates in Japan to borrow the underlying currency and buy higher-yielding currencies and assets. This trade has become so pervasive that the entire financial system is exposed.

With the threat of higher rates in Japan and concerns around a recession in the US, we are seeing substantial selling of the USDJPY to pay back these carry trades.

The quantum of this trade is massive—JPY carry trades are north of US $20 trillion in exposure, and we are seeing the early stages of unwinding now. USDJPY is only at Jan 2024 levels, which is a concern in the short to medium term.

The US wakes up tonight, and they may very well panic when they see the unwind from today. The crypto space is feeling the pain with the market dumping as a beta play on risk.

It is expected to see strong buying below the 50K level in BTCUSD, and at some point, the market may take heed of the presidential odds around Trump, who could come in as a very strong buyer of BTC as part of the strategic reserve proposals floating around.

If this happens, we may see the hedge narrative begin to take hold and along with it, a gold and BTC rally. Technically, the exposed gap from Feb 2024 has filled and broken below two key ascending trendlines prior to now taking a breather back into the range.

These moves have not changed my view one bit – there is a long way to go for BTC in particular, but also for ETH as a proxy for ecosystem growth.

Watch your leverage during these kinds of moves – illiquidity will be an issue in these wild markets.

Key levels: 50,000 / 54,000 / 72,000 / 73,794 (ATH!)

ETHUSD

ETH is taking a bigger hit than BTC due to risk beta. Given risk spillover and the order flow expectations for BTC, should we see a Republican president or the Democrats successfully “reset” relations with the crypto space, structural shorts on ETHBTC make sense?

Key levels: 2,100 / 2,800 / 3,600 / 4,000

Spot Desk

AUD/USD remained weak throughout the week, as the desk saw continued high volumes of USDT/AUD off-ramping activity. We also observed a steady pickup in clients accumulating BTC, ETH, and SOL amidst the market decline, with less interest in altcoins.

Global markets took a toll towards the end of last week as the Yen rallied spectacularly, unwinding liquidity as carry trades saw massive wind. Given the weak AUD backdrop, we expect selling pressure to continue in the broader markets for the week and for off-ramps to continue with strong volumes.

Conclusion

As the market adjusts to these rapid changes, investors should stay vigilant and consider strategic positions. The interplay between macroeconomic trends and crypto-specific news will continue to drive market movements in the weeks ahead.