The cryptocurrency market has seen a sharp decline, with many altcoins dropping 20-50% per day, marking the worst decline since the FTX collapse in 2022. The drop mirrors a broader global market slump, reflecting a period of heavy trading for stocks. The sharp decline in cryptocurrency prices underscores its nature as a “risk-on” asset, which tends to collapse quickly during times of market fear.
Analyst believes cryptocurrency crisis is not over, predicting further shocks after 24 hours.
More problems ahead!
BitMEX co-founder Arthur Hayes has issued a dire warning, predicting a new wave of stock and crypto crashes due to traders’ highly leveraged positions. Despite a temporary respite, Hayes believes market volatility will continue, leading to further corrections.
Global stock and crypto markets are showing signs of recovery. Japan’s Nikkei has rebounded 10%, and global and US stock index futures are up. However, Arthur Hayes warns that this recovery is only temporary. He believes that the first wave of market impact has passed, but that overleveraged investors in traditional markets will cause a second wave of corrections.
If the US Federal Reserve does not step in with a rescue plan, the market could suffer further by Friday.
Cathie Wood explains market volatility
Cathie Wood, CEO of ARK Invest, compares the current market situation to past crises such as Black Monday in 1987 and the Lehman shock in 2008. She notes that the VIX volatility index has reached its fourth highest level in 40 years. This is due to disappointing U.S. economic data and higher-than-expected interest rate hikes by the Bank of Japan, which have led investors to sell assets, triggering margin calls.
Additionally, Wood sees the 10-year Treasury yield hovering around 2%, not the current 3.8% or 5% last October. Despite the U.S. dollar index (DXY) falling below 103, which is encouraging bitcoin buying, the uncertainty is making investors cautious.
Treasury Share Buyback Support
At the same time, the US Treasury Department’s plan to resume Treasury stock buybacks at a rate of $30 billion per month could provide support to the cryptocurrency market. Despite Bitcoin’s rebound above $55,800, a closer look suggests that if Bitcoin breaks through the psychological $50,000 level again, it could revisit the key weekly support level at $45,156.
Investors, stay vigilant!
In conclusion, Arthur Hayes’ prediction of a second wave of stock market crashes due to over-leveraged positions in traditional markets, coupled with the continuing economic uncertainties highlighted by Cathie Wood, suggests that market volatility is far from over.
However, many analysts see this as a positive sign, as the market is currently going through a real bloodbath. These minor corrections are very healthy for the market. They help to eliminate over-leveraged traders and open new entry points for investors.
Investors should prepare for continued turbulence in stock and crypto markets.
