All you need to know about early August crypto market declines

The global crypto market endured one of its biggest setbacks of the year in early August after the Bitcoin price plunged to its lowest level since February. Amid the crisis, the crypto king briefly saw a downtrend that took its price below the $50k mark. As expected, the bearish run extended to major altcoins, with top cryptos like Ethereum, Solana, XRP, Dogecoin, Shiba Inu, and Binance Coin recording double-digit losses. 

The bloodbath significantly affected investors’ confidence, which in turn, resulted in over $1 billion liquidations. According to data from Coinglass, not less than 300,000 crypto traders forfeited their leveraged positions amid the crisis. While the market has shown good signs of recovery in recent days, there’s no doubt that the ripple effect of the crisis still lingers.

Factors that trigger the early August downturn in the crypto market

That being said, many factors, including multiple macroeconomic conditions like the interest rate hike in Japan, worsening unemployment data in the United States, and the rising tension in the Middle East contributed to the downturn. Over the years, the broader crypto market has always responded to situations in the world of traditional finance as well as socio-political developments or issues across the globe. In this article, we will analyze each of these factors and how they individually trigger the early August market turbulence.

Unemployment Data In The United States

The level of unemployment, particularly in the United States, usually has a great impact on the crypto market. Whenever there is a surge in unemployment, the economy is unstable and investors tend to run away from risk-oriented assets. This simply means these investors may prefer shifting their attention to traditional assets like Gold rather than investments with more risks, especially crypto assets. 

As such, it comes as no surprise that the released data which shows a worsening unemployment rate in the United States fueled the early August declines in the crypto market. 

Interest Rate Hike In Japan

On the last day of July 2024. the apex bank in Japan caused waves after announcing an increment in rates of short-term government bonds. In the announcement, the Bank of Japan (BoJ) said the rate has now been increased from 0% to 0.25% to further manage inflation and stabilize the economy of the country. This drastic step hit the traditional market hard, with major stocks like S&P 500 dropping by over 5%. 

The implication of the interest rate hike did not spare the crypto market. Many traders who had initially leveraged their positions with yen-denominated loans were compelled to sell off their positions to avoid substantial losses. The massive sell-off also contributed to the noticeable downturn in the market. 

Growing Tension in the Middle East

Contributing to the early August decline in cryptocurrency prices is the escalating tension in the Middle East. Tensed events like the direct attack on Israel by the Iranian territory. Israel Defense Forces spokesperson, Rear Admiral Daniel Hagari confirmed the country identified and eliminated 300 Iranian drones and missiles, heightening the tensions in the region. 

Meanwhile, the deluge of drones and missiles on Israel came in response to its alleged attack on top Iranian officials in Syria. The increasing level of instability within the region sparked heavy selling in the crypto market. 

Is the crypto market recovering?

As earlier mentioned, the crypto market shows promising signs of staging a full comeback from its recent lows. Thanks to the surge of interest in cryptos, the Bitcoin price saw a rebound that helped it reclaim its $60k level. In the same vein, leading altcoins, including meme coins like Dogecoin, Shiba Inu, and Dogwifhat also traded in the green zone. 

However, the market condition still remains extremely volatile, given the fact that the ripple effects of the crisis are still lingering. Nevertheless, experts believe the market can maneuver its way and stage a full recovery that could probably trigger the next bull run. If this prediction is anything to go by, the Bitcoin price might be retesting its all-time high soon.