Cryptocurrency markets have seen a significant uptick, mirroring the positive movement in other risk-sensitive assets such as U.S. stocks, driven by recent indications that the American economy might be more resilient than previously believed.
Bitcoin, Ethereum, and Solana experienced notable increases on Thursday, with other smaller-cap digital currencies and tokens also registering substantial gains.
Resultantly, BTC-USDT has surged to $60,101, reflecting an 9% increase within the past 24 hours. Ethereum has shown an even stronger performance, rising by 9.5% over the same period to reach $2,635.
SOL-USDT is currently trading at $156 on Gate.io, marking a 8% rise since the previous day.
The price ascent
The week began on a negative note for digital assets, following a jobs report last Friday that sparked concerns about a potential recession in the U.S. economy, which led to a sell-off on Wall Street.
The situation was further exacerbated on Monday when the Japanese yen—often favored by global traders—strengthened against the U.S. dollar, prompting investors to divest from riskier assets, including cryptocurrencies.
However, concerns about the U.S. economy may have eased somewhat after Thursday’s data showed a decline in unemployment benefit filings compared to the previous week, which helped calm investor anxieties.
This optimistic economic news also led to a rise in stock markets, with the S&P 500 and Nasdaq indices gaining 2% and nearly 3%, respectively.
Analysts noted that crypto investors were additionally encouraged by recent developments regarding the recovery of funds for former customers of the bankrupt exchange FTX.
A judge has approved a settlement between the defunct crypto company FTX and the Commodity Futures Trading Commission (CFTC). As a result, FTX is now obligated to pay $12.7 billion to settle the lawsuit.
According to experts, the softening of initial jobless claims temporarily alleviated concerns about a severe economic downturn, which broadly supported risk assets. Additionally, the perception that progress is being made toward FTX creditors recovering $12.7 billion is seen as positive, as some of those funds might flow back into the market.
Other cryptocurrencies also posted significant gains, with Dogecoin rising nearly 7% in 24 hours to trade at $0.1028, and Toncoin increasing by 15% in a day to reach $6.19.
XRP emerged as the biggest winner over the past day, following a court ruling that Ripple, the company behind XRP, would have to pay a $125 million fine to the Securities and Exchange Commission (SEC) as part of a prolonged legal dispute. This ruling has been interpreted as favorable for Ripple, given that the SEC had initially sought a $2 billion settlement. Consequently, XRP surged by 26%, bringing its price to $0.63.
Main moving factors
This week, several factors contributed to the appreciation of the cryptocurrency market, including macroeconomic developments, regulatory shifts, and investor sentiment.
One of the primary drivers was the anticipation of potential rate cuts by the U.S. Federal Reserve, which could alleviate some pressure on risk assets like cryptocurrencies. This expectation has encouraged investors to re-enter the market, seeking to capitalize on potential gains. Additionally, the influx of funds into Bitcoin ETFs has been notable, with over $140 million in inflows, indicating that some investors are buying into Bitcoin during this period of lower prices, which may help stabilize the market.
Another significant factor is the ongoing regulatory developments, particularly in the U.S., where legal victories against the SEC have fostered a more favourable outlook for cryptocurrencies. These rulings, along with growing pressure for the approval of Bitcoin spot ETFs, have bolstered market sentiment, as they signal potential mainstream acceptance and reduced regulatory uncertainty.
Moreover, technological advancements and partnerships, such as those involving private equity firms and Bitcoin miners for AI computing needs, have also played a role in enhancing market confidence. These collaborations could provide new revenue streams and further stabilize the market. Overall, these factors, combined with a broader recovery in market sentiment, have contributed to the positive performance of the cryptocurrency market this week.
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The 5th of August crash
On August 5, 2024, the Japanese stock market faced a severe downturn, with the Nikkei 225 index plummeting by around 12.4%, marking one of the most significant declines in the market’s history. This sharp fall echoed the gravity of past market crashes, such as the infamous Black Monday in 1987. The dramatic loss was driven by a convergence of global economic concerns, with the U.S. economy at the center of investors’ anxieties.
The primary catalyst for this market collapse was the mounting concern over the U.S. economy’s health. Recent economic indicators had suggested potential weaknesses, sparking fears of a slowdown or even a recession in the world’s largest economy. These fears were compounded by a strong performance of the Japanese yen against the U.S. dollar, which reached levels not seen in years. The yen’s appreciation made Japanese exports more expensive on the global market, raising concerns about the impact on Japan’s export-dependent economy.
Investors, wary of these economic headwinds, began offloading riskier assets, including Japanese stocks, in favor of safer investments. The rapid selling created a snowball effect, leading to a widespread panic that gripped the Tokyo Stock Exchange. The sharp decline was further fueled by automated trading systems that triggered sell orders as the market fell, exacerbating the situation and driving the Nikkei 225 index down even further.
In addition to domestic factors, global market conditions also played a role in the Japanese stock market’s crash. The interconnectedness of global financial markets meant that turbulence in one region quickly spread to others. As investors around the world reacted to the economic signals from the U.S., markets in Asia, including Japan, were hit hard. The fear of a broader global economic slowdown led to a flight to safety, with many investors moving their assets into less volatile investments, such as government bonds and gold.
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