Why Did Crypto Slump Late-August?
Crypto markets are never stable. What followed July’s Ethereum merge rally was a recovery of crypto’s market cap that had hit lows after June’s selloff. It regained the $1 trillion mark, but not for long. Things got pretty shaky last Thursday. The market shed nearly $1.2 billion; it dipped below the extraordinary $1 trillion mark three times, the most recent one was seen on Monday. The impact on BTC and ETH? And the reason for the downward pressure? Let’s dive in to know more.
The Federal Reserve officials startled the markets by indicating a 0.75% rate hike in September, hinting that inflation is yet to peak. St. Louis Fed President James Bullard’s comments concurred with chaos in equity and crypto markets as the probability of a less hawkish 0.50% rate hike last month reduced.
Bitcoin shed nearly 10% since last week, with intra-week lows ranging in the $20.000. The most significant price drop in cryptocurrency was seen on Friday after $210 million of leveraged BTC was liquidated to pay the lenders after prices started to descend alongside the broader stock market.
Ethereum also plummeted roughly 10% over the last week, leading to issues for an NFT lender. BendDAO, a group specializing in NFT-collateralized loans, struggled with liquidity issues as depositors drained the company’s reserves from 10,000 wrapped ETH to 5 ETH– adding downward pressure to the second biggest crypto by market cap. Some depositors returned by Monday, giving the firm time to vote on new ways to regain confidence– adjusting its liquidation debut.
With major financial institutions continuing to double down on crypto, and the risky markets remaining near peak correlation, macroeconomic uncertainty is driving the market. Recently, the primary macroeconomic driver was the Federal