Crypto market takes a sudden turn—what's behind this round of sharp decline?
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Crypto market takes a sudden turn—what's behind this round of sharp decline?
Apart from the factor of positive news in the crypto market being already priced in, the U.S. stock market's sharp decline, ongoing uncertainty surrounding Federal Reserve rate cuts, and presidential candidate Harris never having expressed any stance on the crypto market have cast a shadow over the market.
Navigating Web3 tides with focused insightsAuthor: 1912212.eth, Foresight News
Less than two days after the official trading launch of spot Ethereum ETFs, the market has already seen a sharp downturn. Interestingly, while Ethereum had previously rallied due to positive catalysts, it is now experiencing a sharper decline compared to both BTC and SOL following the "sell the news" reaction. ETH has dropped below $3,200, down over 8% in 24 hours, with many tokens across the Ethereum ecosystem also seeing significant losses. Bitcoin briefly fell below $64,000, down 3%, while SOL declined by 2%. In the past hour alone, total liquidations across the market reached $113 million, including $108 million in long positions and $4.2254 million in short positions.
Ki Young Ju, founder and CEO of CryptoQuant, noted that after Mt. Gox began repaying creditors, there were no abnormal spikes in trading volume or inflows/outflows for BTC spot pairs on Kraken. The recent drop in BTC price may therefore be attributed more to market sentiment than actual large-scale selling pressure.
Since the feared Mt. Gox sell-off hasn't materialized, what macro-level negative factors are actually influencing capital flows?
U.S. Stock Market Plunge Drags Down Global Risk Assets
Disappointing earnings reports from Tesla and Google triggered pessimism around the AI bubble, dragging down major U.S. indices. The Nasdaq and S&P 500 closed down 3.64% and 2.31% respectively—the largest single-day drops since the end of 2022—while the Dow plunged over 500 points. The small-cap index fell 2.1%, the semiconductor index dropped 5.4%, and the China-equity index declined nearly 2%.
The combined market cap of tech giants has shrunk by nearly $1.75 trillion compared to its peak ten days ago. Tesla closed down 12.33%, its worst day since September 2020. Nvidia fell 6.8%, Meta dropped over 5.6%, Google declined 5.04%—its biggest drop since late January—Microsoft slid about 3.6%, Amazon fell around 3%, and Apple dipped approximately 2.9%.
As risk assets like U.S. equities collapsed, global investor risk aversion surged. Highly liquid crypto assets were inevitably affected as well, leading to capital outflows and downward price pressure.
Rate Cuts Looming, But Data Still Needs to Cooperate
Crypto risk assets remain highly sensitive to Federal Reserve interest rate policy. Only when the Fed officially begins cutting rates will capital start flowing into higher-yielding assets again, potentially driving up prices in both equities and crypto markets.
There is growing market pressure calling for faster rate cuts.
William Dudley, former President of the New York Fed and a permanent FOMC voter often regarded as the Fed’s third-in-command, stated today: “I’ve long been in the camp of keeping rates higher for longer—I believed controlling inflation required maintaining short-term rates at current levels or even higher. But circumstances have changed, so I’ve changed my mind. The Fed should cut rates, preferably starting at next week’s meeting.”
However, the broader market currently expects the earliest possible rate cut to occur in September, not sooner.
Strong inflation figures and robust employment data during the first half of the year led the Fed to prioritize inflation risks, repeatedly dashing market hopes for earlier cuts. Now, in the second half of the year, as the threat of secondary inflation fades and unemployment rises (to 4.1%), the Fed's risk management focus is gradually shifting toward growth concerns.
Even if the Fed intends to begin easing in September, several procedural steps remain, and upcoming economic data—including inflation, employment, and growth indicators—must align with officials’ expectations to justify a policy shift.
Therefore, an immediate rate cut remains highly uncertain.
Presidential Candidate Harris Maintains Ambiguous Stance on Crypto
President Joe Biden announced today that he will withdraw from the 2024 presidential race and instead focus on fulfilling his duties for the remainder of his term. Kamala Harris has now officially emerged as Donald Trump’s main challenger.
While Polymarket participants currently assign Trump a 62% chance of winning versus Harris’s 36%, a recent Reuters poll shows Harris holding a narrow lead over Trump at 44% to 42%.
Harris has also been confirmed by the CEO of Bitcoin Magazine not to be speaking at the upcoming Bitcoin 2024 conference. Moreover, unlike Trump—who has expressed numerous views on crypto—Harris has never publicly commented on the cryptocurrency industry nor taken any official stance. Financial disclosures further reveal that neither Harris nor her husband holds any crypto assets.
The only indirect connection dates back to the 2020 election campaign, when Harris hired Montoya, former CTO of the NBA’s Sacramento Kings. Montoya helped make the Kings the first professional sports team globally to accept Bitcoin and later launched NFTs. Montoya now serves as a White House assistant focused on scheduling, meaning he is unlikely to influence policy direction significantly.
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