Market Crash - What Happened?

This week, the cryptocurrency market experienced significant volatility as a result of Japan's central bank rate hikes and a weak US jobs report, which increased fears of an economic downturn. The main catalyst was Japan's stock market experiencing its worst one day plunge since 1987. Additionally, there's fear looming of an escalated war between Iran and Israel, raising concerns on the potential global trade and economic impacts.

Bitcoin dropped sharply to a low of $49,600 but has since rebounded strongly, currently trading at $56,772, a 14% recovery from its low. Ethereum also faced a staggering 20% drop within two hours, falling to $2,117 before recovering to its current price of $2,494.

Bitcoin Weekly Price Chart

Positive Future Outlook

With ongoing macroeconomic fears and looming events, panic can set in, leading some investors wanting to de-risk. All global markets experienced large declines, however digital assets faced the largest sell off due to their low liquidity and high risk, simultaneously these assets have the greatest resurgence. Many of the events contributing to fear in the market often do not always play out as expected, and historically, dips like this have proven to be some of the best buying opportunities.

In our last update, we mentioned that we expected short-term buying pressure as investors take advantage of market fear to buy the dip. We continue to believe that Bitcoin can soon reclaim $60,000 and encourage any investor with long term goals to consider the opportunity at hand. Events such as potential US rate cuts in November, Trump's presidency, and the US government using crypto as a reserve asset are catalysts with the potential to drive the crypto industry to unprecedented levels.

Sharp Recovery - Market Manipulation

Significant declines often present strategic opportunities for investors to buy during times of fear. These downturns can create attractive entry points and highlight the coins that recover the quickest, offering insights into what the market values most.

JP Morgan noted that Institutions were capitalising on this opportunity, while retail investors panic sold aggressively. Figues claimed that Institutions bought $14 billion during the dip, which is not surprising after Trump himself said he wanted the US to stockpile Bitcoin and use it as a reserve asset. We believe that markets may have been manipulated to cause a large sell off and liquidity trap in which retail panic sold and the institutions capitalised on their fear.

Identifying the strongest bounces during such periods can indicate which assets are likely to lead when the market starts trending consistently upwards again. We've pinpointed the strongest-performing bounces across key sectors, including Memes, Layer 1s, Real-World Assets, and AI.

Japan's Yen Carry Trade Strategy

When Japan increased its interest rates last week, it caused a significant shift in financial strategies. The carry trade is where traders borrow yen at near zero interest rates to invest in higher yielding assets elsewhere.

However, the recent rate hike disrupted this strategy. As borrowing costs for yen rose, traders began unwinding their trades by selling off other assets, including crypto. This selling pressure triggered a sharp decline in both stock and crypto markets, contributing to the recent market turbulence.

Morgan Stanley to Offer Bitcoin ETFs

Morgan Stanley will begin offering Bitcoin ETFs to its wealthy clients starting today. This is a first among major Wall Street banks, with over 15,000 of their advisers now authorised to sell BlackRock and Fidelity's ETFs. Morgan Stanley currently manages $1.4 trillion in assets, with an average of $582,000 per client.

This decision responds to client demand and marks a significant step towards institutional acceptance of cryptocurrencies. It is likely to boost mainstream adoption and attract more high net worth investors, further legitimising the crypto market.

Binance Inflows Surge and Major Institutions Stand Firm

Despite recent market turbulence, Richard Teng, the CEO of the world's largest centralised exchange, Binance, reported that the platform saw a staggering $1.2 billion in inflows within 24 hours on Monday. This marks one of the biggest inflow days of the year.

Meanwhile, Arkham Intelligence revealed that major institutions like BlackRock, MicroStrategy, Grayscale, and Fidelity have retained all their crypto holdings during this sell off. These significant inflows signal investor confidence, suggesting that even during market volatility, key players and investors remain optimistic about the future of crypto.

Kamala Harris Chooses Her Running Mate

Kamala Harris has selected Minnesota Governor Tim Walz as her running mate for the 2024 presidential election. Walz is rumored to support stricter crypto regulations in the past, which could negatively influence the crypto industry. Hence a rise in Kamala’s odds of presidency has also likely contributed to the market crash and change in market sentiment.

Ethereum ETF Performance

Since the launch of Ethereum's ETF, Grayscale’s fund has consistently experienced large outflows. This is primarily due to the more competitive fees of the new ETF compared to the previous fund, leading investors to move their capital. However, this trend seems to be slowing down, with three out of the last four days showing positive movement. This reduction in sell pressure might indicate a potential stabilisation, which could set the stage for Ethereum’s price to begin trending upward.

Ethereum ETF Flows (m)

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