Global Market Turmoil: US Stocks Plunge, Gold and Silver Prices Tumble, Bitcoin Down Over 17%

Global Market Turmoil: US Stocks Plunge, Gold and Silver Prices Tumble, Bitcoin Down Over 17%Recent global markets have experienced volatile swings driven by multiple factors, including concerns about a US recession, expectations of a Federal Reserve interest rate cut, tensions in the Middle East, and disruptions to yen carry trades. Against this backdrop, global commodity prices have declined, including those for Bitcoin, gold, and silver

Global Market Turmoil: US Stocks Plunge, Gold and Silver Prices Tumble, Bitcoin Down Over 17%

Recent global markets have experienced volatile swings driven by multiple factors, including concerns about a US recession, expectations of a Federal Reserve interest rate cut, tensions in the Middle East, and disruptions to yen carry trades. Against this backdrop, global commodity prices have declined, including those for Bitcoin, gold, and silver.

US Stocks Suffer "Black Monday", Japanese Stocks Record Biggest Single-Day Drop

Weak US nonfarm payrolls data for July, showing an unemployment rate rising to 4.3% - exceeding expectations and marking the highest level since October 2021 - further fueled concerns about a US economic recession. Following the release of this data, the likelihood of a September Fed rate cut has significantly increased, with market expectations for a reduction of 50 basis points.

Investor pessimism about the economic outlook has triggered a sell-off in risk assets, causing a global stock market crash on Monday, dubbed "Black Monday". All three major US stock indices plummeted, with the Dow Jones Industrial Average falling over 2% and the Nasdaq Composite losing more than 3%. The decline was even more pronounced in Japan, where the Nikkei 225 index tumbled over 4%, marking its largest single-day drop since October 1987.

Gold and Silver Prices Plummet, Rate Cut Hopes Already Baked In

Despite rising expectations for a Fed rate cut, gold and silver prices have experienced a sharp decline. As of press time, spot gold has dropped over 3%, breaching the $2370 per ounce level, its lowest point since July 30. Spot silver has fallen even more drastically, declining over 7% and breaking below the $27 mark, its lowest level since May 6.

Caida Futures analysts point out that the significant surge in gold and silver prices had already factored in the positive effects of a rate cut. Short-term stimulative impact of rate cuts on gold prices may have weakened. Once the rate cut materializes, we could witness a short-term fading of the bullish sentiment followed by a period of consolidation.

Yen Interest Rate Hike Impacts Carry Trades, Market Liquidity Strain

The Bank of Japan's recent interest rate hike has affected traditional dollar-yen carry trades. Previously, international investors would borrow yen and convert it to US dollars for investment, benefiting from both US dollar capital gains and US-Japan currency exchange profits. However, the yen rate hike has increased the cost of borrowing yen, reducing carry trade profits and exacerbating capital market pressures.

Amidst recession fears, disrupted carry trade profits, and heightened tensions in the Middle East, financial market liquidity has tightened, placing greater pressure on risk assets.

Bitcoin Down Over 17%, ETH Falls Nearly 25%, Liquidations Exceed $700 Million

Bitcoin and Ethereum prices have undergone significant volatility in the past 24 hours, declining over 17% and 23%, respectively. At press time, Bitcoin has fallen below $29,000, while Ethereum has dropped below $1,800.

Data from Coinglass reveals that liquidations for Bitcoin and Ethereum in the past 24 hours have reached $403 million and $365 million, respectively, totaling over $700 million.

Multiple Factors Impact Bitcoin Price, Safe-Haven Status Questioned

Matthew Graham, founder and managing partner of Ryze Labs, suggests that several factors are influencing Bitcoin's price in the short term, including the possibility of lower interest rates, the potential for a Trump victory in the upcoming election, and the potential impact of reforms to cryptocurrency policies by the Harris administration. The market is closely assessing the likelihood and potential consequences of this policy shift.

Dan Dolev, a senior analyst at Mizuho Securities, believes that Bitcoin is not yet the safe-haven asset that people hope for. If unemployment rises and people lose their jobs, investors will have to sell their tokens.

Market Outlook: Short-Term Volatility Expected, Future Uncertain

Current market volatility is largely driven by macroeconomic conditions and policy changes. As expectations for Fed rate cuts, the situation in the Middle East, and geopolitical risks continue to unfold, short-term market volatility is likely to persist.

The future market direction remains uncertain, and investors need to closely monitor relevant risks and invest prudently.