Macro holdings tighten as losses spill over into the crypto market
The macro market has influenced the price of crypto to a much greater extent in the last couple of months compared to a year ago. This is no surprise given that some of these companies, which are heavily involved in the macro market, also extended their investments into cryptocurrencies such as Bitcoin. Therefore, when the macro environment affected these companies, crypto was affected. Even now, the influence continues to hold.
Losses flow to crypto
During the last week, there have been some major events in relation to the economy. Fed Chairman Jeremy Powell said that as the government tried to get the inflation rate under control, there would be a lot of “pain” coming to the market. The market had taken such gloomy forecasts and run with them, triggering massive losses across the stock market.
By the end of Sunday, the stock market had recorded $1.25 trillion in losses. In comparison, this number is much larger than the entire crypto market cap. The effects of Powell’s speech will continue to be felt, with the Nasdaq losing 4% and the S&P losing 3.3%.
Total market cap below $950 billion | Source: Crypto Total Market Cap on TradingView.com
The spillover effect from the losses was quickly felt in the crypto market. Crypto losses had reached around $100 billion in total during the same time period, pulling it back below $1 trillion. Inflation rates didn’t help either, as it was reported at 2%. Furthermore, there is speculation that there is a high chance that an interest rate increase of 75 basis points will come in September.
The total crypto market capitalization has now recovered to $931 billion at the time of writing, after hitting a local low of $919 billion in the morning hours on Monday.
Looking to the future
There has been a slight rise in the crypto market in the last few hours, but with the trading week opening up, there is still uncertainty about which way the market will swing. Powell’s speech had come just before the weekend, not giving the stock market enough time to absorb and regulate the news. This regulation is expected to take place this week.
As for the expected rate hike, as before, it is likely to trigger another downward trend as investors pull money out of the market. This trend has already been seen in the crypto market, where large investors have pulled out of digital assets such as Bitcoin, leading to double-digit outflows.
September has also been a historically red month for the crypto market. A good example was the market crash that happened in early September 2021. So if the market stays true to this trend, more losses are likely to come as September rolls around.
Featured image from Finance Magnated, chart from TradingView.com
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