Japan's stock market rallied more than 10% on Tuesday. Bitcoin and crypto may have set a new floor after heavy losses in the last four days. All eyes turned to the US stock market open.
Is the garbage out?
On Tuesday, investors saw a 10.2% rebound in Japan's bellwether Nikkei stock index, hoping that the summer crash had come to an abrupt end.
New York time markets braced for a hopeful end to a rush of liquidity and a crash, with the S&P 500 index up 1.3% in mid-morning trading.
Bitcoin's 8% jump in the last 24 hours is bound to inspire animal spirits.
If it does indeed floor on Monday, it will cap a 96-hour stretch in which crypto investors watched in horror as months worth of gains evaporated.
Japan conducts trade
Bitcoin is almost down 24% of its value Between August 2 and Monday, it fell below $50,000 for the first time since February, according to CoinGecko data. And Ethereum fell 31% during that period.
Now let's hope this is a Japan-specific sell-off and that markets will ignore the contagion that has poleaxed equities and cryptos.
Last week, the Bank of Japan raised interest rates by 0.25% to combat inflation. As a result, the yen appreciates and puts pressure on borrowed Japanese investors to invest in all kinds of securities, including US stocks.
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The unwinding of the so-called “carry-trade” was a big reason why the Japanese stock market surged more than 12% on Monday, its worst performance since 1987.
“There is also speculation in the market that the Yen/Dollar carry trade will decrease, with yen holders against the USD forced to reallocate their allocations due to the change in interest rates,” said sales director Albin Wan. Asia-Pacific region at BitGo.
Rush to sell
Rafael Polanski, chief growth officer at BitMEX, agreed. “This led to the sale of these risk assets and the repayment of yen loans, which created downward pressure,” he said. News.
If that selling cycle is closer to the end than the beginning, sentiment will cheer US markets on Tuesday.
Investors have been dumping stocks and crypto since last week's weak jobs report spooked investors that the Federal Reserve made a mistake by not cutting its benchmark interest rate this summer.
But overnight the market retreated.
Solana, for most of the year, has been a standout performer increased by about 20% iIn the last 24 hours. Lido staked Ether also rallied 11% by Tuesday morning UK time. And the total market value of the sector has returned to over $2 trillion.
Investors in Asia are taking comfort in the crypto sell-off this time around.
On Monday, the crash triggered a “sidecar” in the Korea exchange's futures market, a mechanism that restricts trading for five minutes if its benchmark KOSPI futures contract moves more than 5% from the last close.
'The resistance level around $48,000 to 50,000 for BTC is proving strong.'
– Raphael Polanski, BitMEX
But says Justin Kim, head of Korea at Ava Labs News The current sentiment is centered around concerns over the general economy and not specifically about the crypto markets.
“Hopefully, this is a sign that the fundamentals of blockchain technology are strong and that investors are seeing its long-term value,” he said.
The silver lining
Polanski highlighted another silver lining — the crash set a new floor for Bitcoin and itself.
“The resistance level around $48,000 to 50,000 for BTC is proving strong,” he said. News.
But he was careful. “If this trend breaks significantly, the crypto market could see more significant losses in the short term.
A rate cut?
When the smoke clears, the main takeaway is that how yoked Bitcoin may be to the monetary policy machinery of central banks is nothing short of ironic.
“In the short term, I think a lot of determining how the downward trend continues will be in the hands of the global market and central banks,” Polanski said.
The Fed has It has signaled a rate cut Coming up at its September meeting.
Updated August 6 with S&P 500 data and updated Bitcoin prices.
There is Callan Quinn News' Hong Kong-based Asia Correspondent. Contact at [email protected].
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