Global assets faced a “Black Monday,” with circuit breakers triggered in Japan, South Korea, and Turkey. U.S. 2-year Treasury yields fluctuated by 30 basis points, with the 10-year yield briefly ending its inversion. The opening of U.S. stocks saw the market cap of the seven major tech companies shrink by $1.3 trillion, and the Nasdaq closed down 3.4%. Bitcoin plummeted more than 14%, with a surge in liquidation events. The Japanese yen surged, and non-U.S. currencies generally appreciated. Gold dropped nearly $100 from its daily height, while oil remained relatively resilient. Interest rate futures are almost fully priced at a 50 basis point rate cut by the Federal Reserve in September.
After the U.S. stock market opened, the anticipated circuit breaker did not occur. As the S&P 500 and Nasdaq Composite Index rebounded, cryptocurrencies also saw significant recovery. Additionally, the final reading for the U.S. July S&P Global Services PMI came in at 55, expected at 56, with a previous value of 56; the ISM Non-Manufacturing PMI data reversed, indicating strong economic activity and shifting recession expectations.
Three Factors Triggering Panic
- Bank of Japan Rate Hike: The Bank of Japan raised interest rates, strengthening the yen. Japan has long maintained low or negative interest rates, encouraging investors to borrow yen to buy U.S. bonds or stocks for profit. This move diminished the appeal of yen carry trades, prompting investors to withdraw from high-risk assets, leading to a global market sell-off.
- Weak U.S. Economic Data: Last Friday, U.S. employment data was released, including a spike in the quit rate, triggering the “Sahm Rule” recession signal. This rule suggests that when the three-month average of the U.S. The national unemployment rate rises at least 0.5 percentage points above its low over the past 12 months. The economy is in an early recession stage. The market's expectation shifted from a defensive rate cut by the Federal Reserve to anticipation of a recession.
- Geopolitical Risks: On August 4, news broke of an expected attack by Iran on Israel. Geopolitical risks increased global economic uncertainty and market volatility.
Amid macroeconomic panic, Jump Crypto's sell-off exacerbated volatility in the cryptocurrency market. According to Lookonchain's monitoring, Jump Trading is selling 120,695 wstETH (worth $481 million), having sold 83,000 wstETH ($377 million) since July 24, leaving 37,604 wstETH ($104 million) remaining. These 120,695 wstETH ($481 million) were funds recovered by Jump following the Wormhole exploit.
Trump's Remarks
Former U.S. President Donald Trump posted on his social media platform Truth Social: “The stock market has crashed, employment numbers are terrible, and we are heading towards World War III.”
Trump further commented that a significant stock market decline is understandable, and what follows is the “Great Depression of 2024.”
He linked the stock market crash to Vice President Harris, suggesting that more voters should believe the U.S. economy is on the brink of collapse, for which President Biden and Vice President Harris should be held accountable. He also implied that electing him would reverse the economic downturn.
Cryptocurrency Market Trends
BTC and ETH have both passed spot ETF approvals this year, becoming increasingly correlated with U.S. stocks. As macroeconomic data emerges, the Fed's rate cuts loom, geopolitical conflicts, and the upcoming U.S. elections, the factors influencing the market are intensifying. The cryptocurrency market's trajectory closely follows U.S. stocks, with trading impacting prices and expectations influencing trading.
Therefore, it is crucial to closely monitor current macroeconomic expectations to gauge the direction of the cryptocurrency market.