On the Radar – Coins to Watch 08/08

What a week. We’ve witnessed the largest volatility event in broader markets on record since the Covid crisis in 2020. We saw Bitcoin tumble from $58,200 USD on Monday open, to $49,050 USD, a -15% move in less than 8 hours. However, fast-forwarding 24 hours, this whole move has now been reversed for Bitcoin.

Why a Japanese Rate Rise Could Have Caused the Blood Bath

The global economy experienced hysteria on Monday, led by Japan’s stock market, which had its largest drop since 1987.

This was likely caused by the recent spike in interest rates on the Japanese Yen, striking fear into carry traders who borrow Yen for higher yields elsewhere (eg. US dollar yields or purchasing stocks). The higher interest rates have now resulted in many hedge funds and institutions unwinding portfolios, likely contributing to the volatility and market movements we’ve seen.

Check out our latest episode of Tapping into Crypto for a 15-minute breakdown of this event, and how to find altcoins thriving in the current conditions. 

In summary, while the markets have broadly bounced back, we will need more time to understand whether there will be more turmoil next week.

Related: Michael Saylor Reveals He Owns Over US$1 Billion in Bitcoin Personally

Economic Calendar Events

The US ISM Services Growth data was released this Monday. This measures the health of the US services sector by surveying purchasing managers. The above expectations results indicate that the sector is experiencing relative growth compared to the previous month.

Next week, we have major releases to watch, and volatility could follow. We have the latest US Inflation data landing from Tuesday to Wednesday, and Retail sales data on Thursday.

Fear and greed currently reads 42.

Bitcoin – BTC 

After making new monthly lows, the market has thus far regained the June low with haste. However, we could see these two potential scenarios next week. The fact we are still under the close of previous lows from June has me concerned that we may be down here for a while, until we can clear $59,000 USD.

Bullish Scenario

Having broken the June low and reclaimed seeing bulls continue to defend this level in the coming days and weeks will be telling.

Bearish Scenario

Failure to hold this low could result in retesting the most recent lows and potentially below $49,000 USD.

Macro Analysis – Where Are We, Relative to Previous Cycles

Looking at Bitcoin’s previous performance from the halving date can be an insightful exercise to try to understand patterns in seasonality of this asset class. 

The Bitcoin halving is a crucial fundamental event. If we look at the return on investment in the two most recent cycles (marked in blue and green), we see that the first four months after the halving usually involve consolidation and volatility. During this period, prices dropped below their reading at the halving, which is similar to what we are experiencing now in 2024.

Related: Nasdaq and BlackRock Propose Options for iShares Ethereum Trust

Month Four Matters

However, in all previous cycles from the fourth month onward, we have documented a steady rise in the returns. 

Reducing Returns

We can also see a trend that the return on investment has dropped each successive cycle. 

My Thoughts

There are many developments happening in the broader macro environment, so it’s important to stay informed. 

I’ll be closely watching how the markets react over the coming days into next week. It will be interesting to see if any further selling is alleviated by intervention from monetary policymakers and governments.

The yen carry traders may not be finished selling, so we’ll have to wait and see what happens next week.

Keep up to date.

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