Story highlights
- The Crypto Market experienced a severe crash on Monday following a turbulent weekend.
- Most crypto assets lost significant price value following the crash with over $1 billion liquidated from the markets
- Nairametrics explains the Macroeconomic factors as well as other factors that led to the crash.
This week has been a noteworthy one for the global crypto industry following a severe crash in the prices of various crypto assets.
Bitcoin, the flagship crypto asset dropped to below $50,000 for the first time since February while Ethereum the second largest crypto asset by market Capitalization dropped to $2,186 its lowest level since January.
Memecoins which were the strongest performing category of crypto assets a few months ago were not left out in the blood bath.
Memecoins lost 23% of its total market capitalization with top memecoins like Dogecoin (DOGE), Shiba Inu (SHIB), Pepe (Pepe), and Dogewifhat (WIF) recording double-digit losses in prices.
As of Monday, the entire crypto market lost over $1.12 billion to liquidations following the market crash. Over 286,370 traders were liquidated in the space of 24 hours. $936 million from the over $1 billion liquidated belonged to long traders while about $163 million were from short traders.
The total market capitalization of all crypto assets dropped by 17.1% to $1.86 trillion following the crash. However, at the time of this report, it has recovered to $2.090 trillion following a 6.2% surge in the last 24 hours.
There is a combination of factors behind the crypto market crash with each factor contributing distinctively to the market crash.
There are crypto-related factors like Jump Crypto, the crypto trading arm of the Jump Trading Group has moved over $277 million worth of Ethereum to centralized exchanges like Binance, OKX, Coinbase, Bybit, and Gate.io.
This move has sparked a lot of speculation of potential sell-offs by the crypto entity leading to more sell pressure in the market.
Aside from the Onchain activity of Jump Crypto, Mount Gox is still redistributing Bitcoin assets and BTC cash to its creditors via various exchanges like Bitstamp and Kraken. This is also a net negative for Bitcoin price.
In this article, we shall be looking at the macroeconomic factors behind the crypto market crash and the various developments that contributed to the crash.
Macroeconomic causes of the Crypto market crash
Nairametrics sought the insight of two crypto experts and analysts on the macroeconomic factors behind the crypto market crash.
Their submission highlighted the key macroeconomic factors behind the crypto market crash which saw various crypto assets drop significantly in price. They are as follows
The non-farm payroll report
According to Obinna Uzojie, a data analyst at African Policy, the Non-Farm Payroll (NFP) report released by the United States Bureau of Labour and Statistics created a ripple effect on the crypto market.
“The release of the Non-Farm Payroll (NFP) report by the U.S. Bureau of Labor Statistics has had a ripple effect on the markets. The surge in tech stocks, such as NVIDIA, Apple, and Alphabet (Google), has led to layoffs and a consistently low NFP record, resulting in a wave of stock sell-offs. This sentimental bias has spread fear to the crypto markets, causing investors to dump their holdings.” Obinna explained.
Feds and interest rates
Olayimika Oyebanji a Web 3 policy expert explained that a second macroeconomic factor that led to the crypto market crash is the Federal Reserve tightening up the money supply. He also touched on the overall health of the US economy.
“When the central bank cranks up interest rates, it can make borrowing more expensive and riskier assets like cryptocurrencies less attractive. This tightening of the money supply might have been a factor in the crash.
If the overall economy weakens or a recession looms, investors tend to get spooked and pull their money out of risky investments. This could have contributed to the crypto market downturn.” Oyebanji explained.
The US elections
Obinna Uzojie added that the developments and uncertainty surrounding the US elections are another factor that led to the crash. He explained that investors are uncertain about the outcome of the US elections and are withdrawing from the crypto market
“ The uncertainty surrounding the U.S. elections has introduced instability into the economy, exacerbating the global recession sparked by the Russia-Ukraine war. The decline in the dollar index (US30, US100, S$P 500) reflects this uncertainty.
“Investors are withdrawing from the crypto market, fearing potential government sanctions and flagging of crypto exchanges or wallets supporting specific candidates. This fear has led them to hold their funds in protected bank accounts, further contributing to the crypto market crash.” Obinna added.
Other factors contributing to the crash include the Collapse of Japan’s Nikkei and TOPIX indices have each fallen over 8%, marking the worst stock market loss since 1987, and Warren Buffet selling 50% of his Apple position adding to the growing fear of an impending recession.
Crypto market Tuesday rebound
- The Crypto market has regained slightly since Monday’s Crash with Bitcoin now exchanging hands for $56,706 at the time of the report.
- The crypto asset rose by 6.3% in the last 24 hours.
- Ethereum on the other is exchanging hands for $2,480 surging by 1.5% in the last 24 hours.
- The Total crypto market capitalization has surged by 6.2% in the last 24 hours moving from $1.86 trillion to $2.090 trillion at the moment.
