Last week, the crypto market was in a turbulent phase. In particular, Bitcoin, Ethereum and several altcoins experienced significant declines in value last week, causing unease among investors. The market recovered quickly from last night, bringing back a sense of relief and confirming many investors’ confidence in the market’s resilience. But how did this rollercoaster come about?
Fear of recession
On 31 July, the Federal Reserve (Fed) decided to keep interest rates at 5.50%, which was expected by the market. This initially gave the financial markets peace of mind. However, on 1 and 2 August, new economic figures were published that changed this. Worries were fuelled by worse-than-expected employment figures and a higher unemployment rate. As a result, investors now expect interest rates to fall by 125 basis points by December 2024, ending at 4.25%. Many investors now fear that the US is heading for a recession, which has caused a ripple effect globally. Japan was hit especially hard, as the US and Japanese markets are closely linked.
Fears of a US recession, combined with a rising yen, caused the Japanese stock market to fall sharply. Other Asian markets also suffered big losses. In addition, geopolitical tensions in the Middle East increased, with rising tensions between Israel and Iran adding to worries about further escalations.
Buying the dip
A striking development was the reaction of Dutch crypto investors to this dip. A survey by Crypto Insiders showed that as many as 55% of them seized the opportunity to buy additional crypto currencies. This behaviour, often referred to as ‘buying the dip’, shows that many investors believe in the long-term value of their investments, despite short-term market corrections. The survey also found that 42% of respondents chose not to trade and wait and see.
ETFs do well
Digital assets were considered risky investments by investors and so have also sold off in very large numbers in recent days, leading to very large price drops in Bitcoin of over 25% and Ethereum of over 30%.
Still, there was a silver lining: Ethereum ETFs (Exchange Traded Funds) had a historically good day, indicating that investors still see opportunities even in turbulent times. This kind of contradictory movement highlights the complexity and dynamism of the crypto market.
Conclusion
All this highlights the volatility of the market, but also the resilience and confidence of investors. While some factors are beyond the control of individual investors, the core message remains that those who believe in the long-term continue to benefit from strategic buying during dips.
