Fed "Firefighting," Cryptocurrencies Rebound—Time to Buy the Dip?
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Fed "Firefighting," Cryptocurrencies Rebound—Time to Buy the Dip?
The market rebounded on Tuesday—has the crypto market already hit bottom and started to recover?
Navigating Web3 tides with focused insightsBy Mia, ChainCatcher
Edited by Marco, ChainCatcher
After a "Bloody Monday," global markets found a brief respite today.
Asian equities surged at Tuesday's open, led by Japan’s Nikkei and Topix indices. The Japanese benchmark Nikkei 225 climbed over 8%, recovering some of Monday’s 12% plunge; Australian markets were flat; U.S. equity futures also rose, with Nasdaq 100 futures gaining over 2%.
Meanwhile, the cryptocurrency market showed signs of recovery, with the global crypto market cap rebounding above $2 trillion and BTC reclaiming $55,000.
Despite ongoing concerns about a U.S. economic slowdown and geopolitical risks, investors are actively seeking opportunities to buy the dip.
Fed Officials Rush to Calm Markets
Global markets plunged sharply on Monday, sending investors into panic. Chicago Fed President Austan Goolsbee and San Francisco Fed President Mary Daly stepped forward to “fight the fire” and calm market nerves.
Goolsbee emphasized that July’s weak nonfarm payrolls report was just “one data point,” insufficient to conclude that the economy has entered recession. Daly also noted that the U.S. labor market remains solid and that policymakers will await more data before deciding on action. She added that the FOMC would remain open to rate cuts at its next meeting.
Currently, traders widely expect a 74% chance of a 50-basis-point rate cut at the Fed’s September policy meeting, with a 27% chance of a 25-basis-point reduction. According to CME’s FedWatch tool, earlier on Monday, markets had fully priced in a 50-basis-point cut, and during the peak of panic, even a 75-basis-point cut was considered possible.
Analysts offered various explanations for this market rebound.
Some analysts believe investors are gradually calming down from fears of an imminent U.S. recession, leading to adjustments in their Asian market strategies. On Monday, the U.S. ISM Services PMI for July rebounded to 51.4, in line with expectations, further easing market anxiety.
On the other hand, Japan’s strong equity rebound may also be linked to the gradual stabilization of carry-trade unwind. Chris Weston, head of research at brokerage Pepperstone, predicted before the market opened that Monday’s historic selloff across Asian markets was primarily driven by massive margin position liquidations. He anticipated a sharp rebound on Tuesday. However, he warned that after such intense leveraged adjustments, major Japanese banks have suffered heavy losses, and only the boldest investors may dare enter the market now.
Cryptocurrencies Rally Across the Board
The global crypto market cap has recovered to $2.06 trillion, with BTC breaking above $56,000 and its 24-hour loss narrowing to just 0.24%. Established altcoins like SOL and BNB saw broad gains, rising around 8% within 24 hours. BNB has rebounded to $480, up 9.5% over the period, while Solana has climbed above $140, gaining nearly 15%.
In response, Galaxy Research head Alex Thorn remains bullish, stating, “Although this decline appears severe, its magnitude is consistent with drawdowns seen during previous bull markets.”
Bitwise CEO Matt Hougan compared this weekend’s crash to the March 2020 meltdown in a recent article, calling yesterday’s sell-off a buying opportunity.
Additionally, this rally is closely tied to contrarian whale trading behavior—some large holders are buying the dip, and their actions often signal future trends.
Currently, the volume of Bitcoin withdrawn by whales from exchanges has reached a nine-year high. In July alone, large holders increased their BTC holdings by 84,000 coins.
According to @ai_9684xtpa, a whale who began accumulating 58,400 ETH at an average price of $2,265 since May 2023 has again bought the dip, withdrawing 6,000 ETH worth $13.82 million from Binance nine hours ago during the crash, at a cost of approximately $2,304 per ETH.
Additionally, an address疑似linked to Justin Sun withdrew 14,884 ETH (~$34.7 million) from Binance today, bringing his total ETH holdings to over 700,000.
ETH has since rebounded above $2,400, briefly touching $2,500, with its 24-hour loss narrowing to 6.77%.
Compared to established altcoins, newer narrative-driven tokens showed weaker rebounds, with investors remaining cautious.
Data shows TON dropped 17% last month. According to Santiment, the number of whales holding large amounts of TON increased by 2% over the past month. However, TON’s rebound remains weak, up only 3.3% in the last 24 hours.
Where Is the Market Heading?
Despite the rebound, investors should remain cautious.
The current situation may present good long-term entry opportunities, but in the short term, the global market recovery could still face uncertainty.
Markus Thielen, founder of 10x Research, said if the current economic weakness worsens into a recession, Bitcoin could fall to $42,000.
Moreover, although Asian equities and crypto markets are both rising, market sentiment remains fragile.
Financial analyst Jill Schlesinger pointed out that most stock indices hit new highs in mid-July, and since then, concerns have grown that the bubble might burst.
However, in the long run, global market direction will depend more on fundamental factors. U.S. institutional investors remain optimistic about BTC and ETH developments, and whales’ contrarian trading strategies may also signal future upward trends.
Some analysts note that there are currently no clear signs of economic recession, Japan’s rate hike has not directly impacted U.S. markets, and its effect on crypto is limited. Markets are largely driven by sentiment, but U.S. stocks have already begun to rebound.
Daniel Cheung, co-founder of Syncracy Capital, expressed optimism: “Crypto is expected to recover relatively quickly, as most of the current selling has been forced and purely panic-driven. Ironically, the gateway to a larger bull market has already opened.”
Additionally, analysts noted that BTC and ETH on CME continue to trade at positive premiums. Even with wide spreads, these haven’t significantly impacted spot prices, possibly indicating limited hedge fund interest or lack of large-scale hedging. The positive CME premium suggests U.S. professional investors remain bullish on BTC and ETH. While CME serves as an arbitrage mechanism, widening spreads don’t necessarily trigger liquidations. Ultimately, the market focus remains on investor expectations for the future.
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