Digital assets suffered a sharp decline, alongside U.S. stocks, after surging in the early hours of Tuesday.
Tuesday’s cryptocurrency market rally stalled as bearish sentiment prevailed, with major assets posting modest daily gains after falling sharply over the past two hours.
Bitcoin (BTC) is up just 0.6% over the past 24 hours, while Ethereum (ETH) has gained 0.1%. Polkadot (DOT) is up 0.9%, and Solana (SOL) is down 1%. However, BTC is down 4% from its intraday high of $61,400, while ETH is down 4.8% after testing $2,700.
Several memecoins are among the top 100 performing assets after suffering sustained losses in recent weeks. Brett (BRETT) is the biggest gainer of the day after rising 20%, followed by BitTorrent (BTT) with 18% and Aave (AAVE) with 12%. Dogwifhat (WIF) is up 11% and FLOKI (FLOKI) is up 10%.
Fasttoken (FTN) saw the biggest decline at 6.9%, followed by Litecoin (LTC) at 4.8% and Mantra (OM) at 2.3%.
Over the past 24 hours, 38,144 traders were liquidated for $86 million. This included $26 million in short positions in BTC and $9 million in ETH, according to CoinGlass. Short liquidations occur when prices are rising, and traders who bet on a price decline are forced to close their positions at a loss.
Stock markets falter after two weeks of recovery
The pullback in digital assets coincides with a decline in U.S. stock indices after two weeks of price gains from early August lows.
The S&P 500 index fell 0.20% in 24 hours, the Nasdaq 100 fell 0.24% and the Dow Jones Industrial Average lost 0.12%. This follows a bullish day for major Asian markets, with Japan’s Nikkei 225 up 1.80%, South Korea’s KOSPI up 0.83% and Australia’s All Ordinaries up 0.16%.
Major global stock indices have staged a strong recovery after suffering sharp losses two weeks ago in response to the Japanese central bank raising interest rates by 0.25%, only its second rate hike from 0% since 2007 and the first in more than a decade.
In response, investors rushed to liquidate their yen carry trade positions, triggering a sharp correction in global markets. Bitcoin fell from around $65,000 to $50,000 in just a few days as risk assets took a beating.
However, bullish traders quickly stepped in to buy the dip, with analysts and former Bank of Japan officials saying the central bank would likely delay further interest rate hikes until next year.
“They won’t be able to do any more increases, at least until the end of the year,” said Makoto Sakurai, a former board member, according to Bloomberg. “It’s hard to know if they’ll be able to do a single increase by next March.”
Gold prices also hit a new all-time high on Tuesday morning, climbing 0.8% to $2,524.88 an ounce and over $1 million per 400z mark for the first time.
Investors expect US rate cut next month
Federal Reserve Chairman Jerome Powell is scheduled to speak at the Jackson Hole symposium on Friday. Wall Street is hungry for clues about the Fed’s next move, with the CME FedWatch tool indicating a 100% chance of a rate cut in September.
“Markets are now more confident that the US Federal Reserve will cut interest rates by 0.25% at its September meeting,” said Rania Gule, senior market analyst at XS.com, a multi-asset broker. “They are also pricing in the possibility that another negative surprise in employment data on September 6 could lead to a 0.5% cut.”
Gule speculated that a rate cut would be beneficial for Bitcoin and crypto markets in general. “When the Federal Reserve cut interest rates in July 2019, Bitcoin initially rose 20% in a short-term rally,” she said.
She noted, however, that Bitcoin ended 2019 down 35% from its post-dip high, despite the Federal Reserve making two additional rate cuts later in the year.
