Crypto market regains footing after surprise macro shocks

Hola folks!

The crypto market has staged a sharp recovery over the past week, recovering most of its losses triggered by US unemployment data and a 25 basis point hike by the Bank of Japan. While the crypto market is stabilizing, investors can expect some volatility as Yen carry trade will unwind in the coming months. The increased chances of a Fed rate cut will also impact the market. 

Read today’s edition of Switch Weekly to know more about the major economic and crypto events that unfurled last week and how they impacted crypto prices.

It was a rollercoaster week for crypto market participants as there was a wider reset across asset classes after the twin macro shockers from the US and Japan. The two triggers of higher-than-expected unemployment data in the US and a 25bps rate hike by BOJ, jolted global "risk on" assets as they marked the end of the JPY Carry Trade, resulting in broad-based selling across markets. 

However, both these negative triggers were mitigated towards the end of the week, which resulted in a rebound in market prices. The most recent US jobless claims data brought solace, while the BOJ decided to hold back its rate hike decision due to the induced volatility in markets. This resulted in a "relief rally" across "risky assets" as the crypto market pared some of its massive losses, and the overall market cap bounced back to above $2.1trn.

However, investors can expect increased volatility in the coming months as the JPY Carry Trade is wound down, along with increased chances of the Fed cutting interest rates to spur the US economy. Meanwhile, the threat of increased conflict in the Middle East, especially between Israel and Iran, has added more uncertainty to the situation. Leverage trading should be avoided as exaggerated market moves can result in liquidations.

It is worth highlighting that recovery in BTC prices was much sharper compared to ETH, surging back above $60k from weekly lows of just below $50k and settling around $58k levels. Meanwhile, ETH prices were comparatively weaker in their recovery and remained just below $2.6k. 

The focus has shifted away from the ETH/BTC ratio to the SOL/ETH ratio as Solana's prices are recovering much more quickly. One of the reasons being highlighted is the movement of ETH from wallets involved in the $4bn PlusToken Ponzi scheme in China, which could add potential sell pressure. ETH ecosystem tokens also suffered, with liquid staking giant Lido's LDO protocol falling 20% in price, to recover later.

In the broader altcoin universe, there were heavy losses across token prices, but after the bounce back later in the week, most tokens were back in the green. There's an investor bias of rotating capital into "quality crypto", resulting in an outsized fall in altcoin prices compared to BTC and ETH. 

Another major trigger for prices might come after a US judge ruled that FTX and Alameda must pay creditors $12.7bn as per bankruptcy proceedings. But it was not all gloom for the broader markets as there were positive outliers on the back of specific triggers. 

Among the large-cap tokens, Ripple’s XRP bounced back nearly 20% after it won the "securities listing" case against the SEC and ended up with a much lower settlement of $125 million in fine against the SEC’s demand for billions.

The other major positive gainers for the week included SUI and BitTensor's TAO after Grayscale announced that it would launch new crypto trusts for these tokens, resulting in over 50% gains for the week. 

A couple of other standout positive gainers included Celestia's TIA which made a strong comeback and Helium's HNT which surged on the back of its mobile subscriber count crossing 100k. 

Even as the broader altcoin universe saw heavy price correction, there were some recent outperformers (Maker's MKR and AI-themed FET) that fell more sharply as they came under selling pressure due to profit booking, and ended the week flat. 

• BTC $58,768 ⏫ 11.02%

• ETH $2,572 ⏫ 8.88%

• SOL $146.12 ⏫ 17.93%

• XRP $0.5693 ⏫ 20.41%

(All data here is as of 1.15 p.m., 12 August 2024)

Before we conclude, here’s a quick look at some important news from around the crypto world.

• Bitcoin (BTC) investors endured a rollercoaster of action as prices plummeted through the Aug. 4-5 weekend to $49,000 by early Monday before modestly rebounding to around the $56,000 level in morning US hours, triggering diverse reactions by holders. Bitcoin whales, or large asset holders, seized the opportunity of lower prices to purchase, while small investors sold as panic ensued, data by blockchain analytics firm IntoTheBlock shows. Read more here. 

• XRP surged 17% to lead market-wide gains after a US judge made a milestone ruling in the long-running case between the closely related Ripple Labs and the US SEC. A federal judge ordered Ripple to pay $125 million in civil penalties and imposed an injunction against future securities law violations. Read more here.

That’s it for now. Thanks for sticking around.

See you later, folks! 👋

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