Crypto gets Monday blues: what’s next after drastic declines of BTC, ETH, Solana?

The crypto market has experienced its largest three-day sell-off in almost a year, shedding as much as $510 billion since August 2.

This sharp decline coincides with a faltering performance from equities, with the S&P 500 falling as much as 4.4% in the same period.

Several factors, including weak employment data, slowed growth among major tech stocks, and revived recession fears, have contributed to the market downturn.

Weak employment data and recession fears

The latest employment data has fallen short of expectations, reviving fears of an impending recession. This economic uncertainty has led to a shift in investor sentiment, contributing to the sharp sell-off in the crypto market.

Underperformance of major tech stocks

Major companies like Microsoft and Intel posted lower-than-expected Q2 results, impacting market sentiment. Additionally, NVIDIA has been hit hard by expectations of impending rate cuts in September, causing capital to flow back into smaller, lagging companies.

Aggressive selling by Jump Crypto

Jump Crypto’s significant offloading of assets has aggravated the market downturn. According to Arkham Intelligence data, the trading firm has offloaded hundreds of millions of dollars in assets over the last several days.

Bitcoin and Ethereum see drastic declines

Bitcoin and Ethereum have seen significant price drops during this market sell-off. On August 5, Bitcoin fell 10% and Ethereum plummeted 18% within just two hours. As of now, Bitcoin and Ethereum are down 20% and 28% over the past week, respectively.

Solana leads losses among top cryptocurrencies

Solana has been the hardest-hit cryptocurrency among the top 10 by market cap, falling 30.6% since July 30. This significant decline highlights the broader impact of the market downturn on major cryptocurrencies.

Crypto Fear and Greed Index falls into ‘fear’

The Crypto Fear and Greed Index, which tracks market sentiment toward Bitcoin and crypto, has fallen back into “fear” territory, displaying a score of 26 at the time of publication. This shift in sentiment reflects the growing uncertainty and caution among investors.

Potential recovery driven by traditional financial institutions

The crypto market’s recovery will likely depend on an uptick in spot and derivatives activity from traditional financial institutions. Keith Alan, co-founder of Material Indicators, noted that Bitcoin has entered the CME Gap, but it can only be filled during traditional financial trading hours.

Technical analysis points to further declines

Bitcoin’s recent plummet to $54,000 marks a 7.31% intraday drop and a 17% decline over four days. This sharp descent has pushed Bitcoin below its 200-day EMA, with a downtick in the 50-day EMA signaling a looming death cross.

Similarly, Ethereum has faced significant losses, falling to $2,350, a 30% decrease in seven days.

Japan’s rate hike impacts crypto prices

Japan’s recent 25 basis point interest rate hike has spiked all risk assets, including Bitcoin and Ethereum, which dropped by over 12% and 22%, respectively. Japan’s financial markets have been experiencing significant losses, contributing to the global market downturn.

Global market instability

A wave of financial collapses across global markets has raised concerns about a potential Black Swan event or a Black Monday.

South Korea has halted all sell orders, and the Magnificent 7 stocks in the United States have erased nearly $500 billion overnight.

Additionally, the US employment rate has dropped, increasing the possibility of a recession.

What’s next for the crypto markets?

Despite prevailing fears, some bulls and retail traders see the current market conditions as an opportunity to buy the dip.

Social sentiment around buying at lower prices has spiked, although data from Santiment suggests that levels remain under the required limit, indicating a potential for further declines when US markets reopen.

The road to recovery

The crypto market faces significant challenges in the coming weeks. Investor sentiment will be crucial in determining the market’s trajectory, with the potential for further declines if current economic uncertainties persist.

However, the market’s resilience and the entry of traditional financial institutions could provide a path to recovery in the longer term.

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