Categories: MarketsMenafn

Crypto Market Crash: Is It Still Continuing?

The crypto market crash on Aug. 5 shook up the crypto community.

On Aug. 5, the crypto community experienced a significant shakeup as some altcoins fell by almost 50% in a single day.

In this article, we will explore what may happen to the crypto market following this crash.

Crypto Market Crash: Why Did It Happen?

On Aug. 5, Bitcoin (BTC) lost support around $50,000 and fell to $49,781. This event reminded the crypto community of March 2020, when BTC’s price collapsed by 43.7% in a day.

Despite such deep drops, some optimistically noted that cryptocurrencies have continued to rise after past crashes.

Several factors could have contributed to this crypto market crash: the US election, expectations of a worsening situation in the Middle East, and macro and microeconomic indicators.

Many believe that the weakening of the Japanese yen (JPY) against the American dollar (USD) played a significant role, causing a sharp decline in American stocks.

The JPY began to strengthen against the USD due to interest rate hikes by the Bank of Japan to combat inflation. But how did this affect the U.S. stock market and cryptocurrency?

To boost profits, some traders converted JPY into USD, borrowing the currency at a low interest rate to purchase U.S. stocks.

However, the increase in Japan’s key rate meant higher borrowing costs, increasing the risk of loss. Moreover, their U.S. stock assets might be worth less than the commission they must pay.

Traders began closing their positions, leading to price pressure. They sold assets to cover their costs, further driving down prices.

Not everyone agrees that the strengthening of the yen against the dollar caused the U.S. market to fall. Some point to macroeconomic factors, often referring to the Real Time Sahm Rule Indicator, which signals a recession based on U.S. unemployment data from the past three months.

Crypto Market Crash: Recovery?

Although some coins fell nearly 50% on August 5, many have already gained 20-30%.

However, there is a danger that those who bought crypto assets during the August 5 drop may sell them soon, potentially leading to another correction.

Joel John believes (see point 8) that crypto assets in the cashflow category will quickly return to normal and regain their liquidity. He includes coins like Aave (AAVE) and Uniswap (UNI) in this category.

According to Token Terminal, during the Aug. 5 crypto market crash, the Aave protocol led in monthly governance token trading volume, reaching almost $5 billion. In comparison, Compound, in second place, saw nearly $1.5 billion.

In general, coins from decentralized finance (DeFi) protocols have recovered faster than others. One indicator is Solana’s trading volume in Decentralized Exchanges (DEX), which hit a new all-time high (ATH) at $4.072 billion.

Total Value Locked (TVL) in the DeFi has also grown in the last 24 hours. Among the leaders is the Solana blockchain with a 16.14% increase. Interestingly, TON has overtaken Solana with a growth of 16.69%.

TVL growth in DeFi. Source: DeFiLlama
Jerry Rolon

After working for 7 years as a Internet Marketer, Jerry now aims to explore the journalistic side of Internet. With his impeccable knowledge in this domain, he churns out some of the best news articles from the internet niche. With respect to acedamics, Jerry earned a degree in business from California State University.

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