Crypto has been on one hell of a rollercoaster lately.
Since the end of July, the crypto market attracted $200 billion and grew to a total $1.2 trillion market cap—only to lose it all in the past few weeks. Last Friday alone, crypto shed 9% of its value, the biggest one-day drop in two months.
Not one major crypto dodged the blow.
In the past week, the bitcoin price retreated 7.1% to $21,700 after breaking through $25,000 on August 15. And following its worst week since July, the ethereum price continued the descent, falling 7.4% to $1,700.
There’s one telltale sign that hints at the culprit of this flash crypto sale; it’s that it all happened in sync with stocks—which indicates that crypto sell-off is a broader risk-off sale rather than a crypto-specific event.
The stock market has been chugging lower since last Wednesday when the Fed released minutes from the last FOMC meeting. The record revealed that Fed officials see “little evidence” of easing inflation and they are committed to taming it at all cost.
Remember that the Fed also dropped future guidance at its last meeting. That means Powell isn’t going to “wink” at the market, suggesting what the Fed will do next, anymore.
The unknown is rattling investors who sold off stocks ahead of Jackson Hole where Powell is expected to give more clarity about what he’s up to.
Now, because crypto is still highly correlated to tech stocks and has higher beta, it simply amplified the moves we’ve seen in the Nasdaq, which has plunged 5.5% since last Wednesday.
For their part, leveraged crypto traders added fuel to the fire, too. According to Coinglass data, last Friday saw the biggest liquidation of crypto long positions on futures since June 18.
All eyes are on Jackson Hole this coming Friday. Take note, because at this point, a single word out of Powell’s mouth can shuffle around hundreds of billions of dollars in any risk asset, including crypto.
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