Bitcoin Crashed to 49,000, adding 16% to last week’s 13% drop. Altcoins were also impacted, showing a significant decline. The whole crypto market reduced to 1.85 Trillion USD from last week’s 2.48 Trillion USD.
Sensex crashed, the Asian stock market collapsed, and Nasdaq futures are down, this global financial crisis affected the crypto market, prominently the foundational BTC, which went from last week’s 1.4 trillion market to 977 Billion.
Possible Reasons for the BTC Crash
Crypto experts are pointing towards many possible reasons for the BTC crash, and the ongoing US Recession is the major one. The global market crash, regulatory uncertainty, the elections, sell-offs, and the Iran-Israel conflict, are numerous reasons from analysts. Let’s analyze the core reasons for the drop.
Climate Change and The Economy
Be it the US recession, the global crypto crash, or regulations against BTC, all these decisions and happenings are hugely related to climate change. Global warming, rise in sea level, landslides, and forest fires, all affect the global economy significantly.
For example, as the late David Graeber pointed out in his writings, companies are realising the connection between the climate crisis and jobs. Elimination of unnecessary jobs can significantly reduce the climate crisis.
Giant companies are trying to be carbon neutral by reducing unwanted positions and architecture. The shortage of labor will increase wages. This wage inflation will lead to a rise in the prices of goods and services, paving the way to overall inflation. Inflation will increase the interest rates and affect liquidity, resulting in a market crash.
Other than that, investors are seeking carbon-neutral assets to invest in. Bitcoin is not carbon-neutral as it involves large computation power. The lack of insurance for climate disasters also affected the trust in the current economy. Climate issues are always the direct and subtle causes of all economic conditions.
Hidden Whale Activity in BTC
There are always multiple reasons that are mutually dependent causing an issue. We can’t point to a single reason. However, from the inception itself, there have been speculations regarding a group of potential Bitcoin whales secretly controlling the crypto market. Although there is no single entity causing a market to crash, we can’t ignore the whale activity in the charts. There are opportunist whales in every coin.
BTC ETF (Exchange Traded Fund) has seen a single-day outflow of 237 million on August 2nd. German government sold almost all seized Bitcoin, and major sell-offs happened in governments and other institutions. And, the whales also took the opportunity driven by their luck, leading to massive sell-offs.
Also, the charts show a loss in Bitcoin liquidity. Many BTC from exchanges were moved to personal wallets. Also, the government bonds affected the liquidity of BTC. With this dip, we can see the whales accumulating more and more Bitcoin.
Geopolitics and Global Power Shift
Bitcoin prices came down as a byproduct of the global market crash. So, the reasons for the BTC crash are almost similar to the stocks. Many experts see this correction as a part of the geopolitics. Here are some potential scenarios regarding the global economy:
- Coin by BRICS: The BRICS (Brazil, Russia, India, China, and South Africa) are planning to release their stablecoin which will shake the dominance of USD, especially over Gold, oil, and BTC.
- The U.S. Recession: Because of the power shift, many analysts predicted the U.S. Recession would be in 2024, and see this stock market crash as an initiation of that. But the Federal Reserve discarded this saying there won’t be any massive economic downturn soon. The potential interest hikes because of the climate crisis and unemployment in the U.S. will affect the economy. The dependent countries will turn away from the U.S.
- BIS Support for Asia & Pacific: The Bank of International Settlements (BIS) published its annual report for 2023/24 on 30th June, celebrating the 25th anniversary of the Asia and Pacific offices. It says in its report that more focus will be given to non-Western regions.
The Recovery of BTC Amid Financial Crisis
BTC is not an asset solely dependent on any government-led economy. So it will rise again. The exact time is the only thing we are uncertain about. Regarding the short-term recovery from this, we have some events ongoing. White House officials and crypto industry experts will conduct a virtual meeting today to discuss policies regarding digital assets. Current Vice President and Presidential nominee Kamala Harris will attend the meeting.
If Democrats collectively take a crypto-friendly stance, then we can see an upward trend. Also, the U.S. elections are on November 5th, so we will see money flowing to the crypto market around September, October, and November. If U.S. elections are unable to show any significant price changes in the chart, it means the power shift is live.
Final Thoughts: Is it a Good Time to Invest in Bitcoin?
Bitcoin has seen many downward movements like this. There were huge corrections larger than this in previous markets. Only, short-term traders are bothered about these corrections that happen often. It is better to HODL the Bitcoin for the long term.
Today or tomorrow, there is another chance for a small correction, like what happened in previous downfalls. We can see an uptrend from this soon.BTC will recover and stand as the godfather of all assets soon. It is about finding dips and investing at the right time. Always proceed with caution.
The value of assets is like religion, nations, and governments. As more people believe in it, it becomes more powerful. BTC will recover soon primarily because of its intrinsic value.
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