Global Financial Shock: Market Downturn & Crypto Market Crash

At this very moment, the world is facing yet another financial shock, the largest since the infamous Black Monday of October 19, 1987 — a day when the Dow Jones Industrial Average experienced the greatest single-day percentage drop in its history, plummeting 22.6%.

More: How Bitcoin Performed this Week?

Global stock markets are taking a significant hit due to weak employment data from the U.S. and renewed fears of a recession.

Here's a breakdown of the chaos:

- Japan: It all started in Japan. The Nikkei 225, the key indicator of the Tokyo Stock Exchange that includes stocks of the 225 largest companies in Japan, plummeted by 12.4% by the end of trading on August 5. This marks the largest drop since 1987.

- Turkey: The Istanbul Stock Exchange (Borsa Istanbul) announced a halt in trading after its main index, BIST 100, fell by 6.72%.

- South Korea: The Kospi index fell by 8.1%. The Shanghai Composite index in China dropped by 0.9% during trading. Hong Kong's Hang Seng lost 1.8%, hitting a 19-month low, and Australia's S&P/ASX 200 index declined by 3.5%.

There were also major losses in the cryptocurrency market. Bitcoin's price fell below $50,000, dropping 18% in the last 24 hours and nearly 20% over two days. This is the lowest price since January 2024 and the sharpest drop since 2021.

Ethereum, the second-largest cryptocurrency by market capitalization, took an even harder hit, falling over 20% in a single day. It’s currently trading at $2,200.

In addition to the losses of the major cryptocurrencies, more than 17% of the total cryptocurrency market capitalization has been wiped out, with $600 million worth of long positions liquidated by traders.

Crypto Market Meltdown: A Rough Week Ahead?

The cryptocurrency market recently faced its most substantial three-day sell-off in almost a year, losing $510 billion in market capitalization since August 2. The market cap was roughly $2.16 trillion but fell to around $1.76 trillion by August 5.

The market's tumble was triggered by weak employment data, slowing growth in major tech stocks, and the resurgence of recession fears. Over the last 24 hours, more than $740 million in leveraged positions were liquidated, with just over $644 million in leveraged long positions getting wiped out.

Interestingly, traders seeking leverage in Ether took the biggest hit, with over $256 million in ETH long positions cleaned out, while $231 million in BTC long positions were forcibly closed.

Bitcoin's price dipped below $50,000 for the first time since February, hitting a low of $49,351 before bouncing back to around $51,000.

This market crash also caused Ether to plummet, losing nearly 20% of its value in just two hours.

With renewed recession fears, poor U.S. employment data, and sluggish growth among leading tech stocks, this market drop might just be the beginning. The crypto market faces another tough week ahead. A significant portion of the weekend's losses will likely be compounded by increased activity in the spot and derivatives markets of traditional financial institutions.

Related: What's Bad for the U.S. Economy Might Be Great for Bitcoin

When investors panic or seek to reduce debt, cryptocurrency often tops the list of assets to be sold. Crypto assets are getting sold off, but many investors might see an opportunity. The Federal Reserve's likely faster-than-expected rate cuts could be extremely positive for crypto.

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