The cryptocurrency market experienced a significant impact when Bitcoin’s price suddenly dropped to $49,000 on the morning of August 5. This unexpected event, often called a “Black Swan event,” raised questions about the factors and reasons behind the Asian market downturn on that day.
U.S. Stocks Decline Due to Rising Unemployment and Election Uncertainty
On the evening of August 2, the U.S. unemployment rate was reported at 4.3%, higher than the anticipated 4.1%. This news sparked widespread concern among financial investors, as it could signal a new recession in the world’s largest economy. The ensuing panic led to a widespread market downturn, causing Bitcoin’s price to plummet to below $60,000.
The election tensions in the U.S. further fueled economic and political instability, prompting investors to sell off their stocks, leading to a significant drop in the U.S. stock market.
Japanese Stocks Fall Due to “Yen Carry Trade”
“Yen carry trade” is a financial strategy in Japan. It involves borrowing Japanese yen at low interest rates to invest in assets denominated in USD or Euro with higher returns. The profit from the “Yen carry trade” comes from the difference between the low-interest repayments on the yen loans and the higher returns from the invested assets.
In March 2024, Japan started increasing interest rates on loans, leading many investors to sell off their holdings to repay their yen debts due to diminishing profits. This move caused widespread concern as the risks associated with unwinding the “Yen carry trade” are significant.
Japanese Market Decline Affects All of Asia
Due to the “Yen carry trade” strategy, the Japanese stock market experienced a significant decline. This decline had a domino effect on other Asian markets, causing a sell-off of assets such as stocks and cryptocurrencies.
By the afternoon of August 5, the price of BTC temporarily stabilized at $52,500 after dropping to $49,000. As of this morning (August 6, 2024), BTC had recovered and gradually rose to $55,800. Additionally, the Japanese stock market showed positive signs, with the index increasing by nearly 4,000 points.
Related news: Bitcoin Shows Signs of Recovery, Reaching Around $55,000 After a Sudden Plunge
