After a period of rising prices, the market was optimistic. The fact that American presidential candidates were praising bitcoin even led to a sense of overconfidence. But in the night from Sunday to Monday, sentiment suddenly shifted, and prices plummeted. What happened? And is that episode now definitively behind us?

• Market: The prices on the crypto market were in the red this past week. A significant drop brought bitcoin to $49,000 and ether to $2,100, the lowest point of this correction.
• News: Decentralized networks weathered the price crash well. DeFi protocols functioned as intended, and the Ethereum network remains healthy with over a million validators!
• Behind the scenes: We are proud to announce our partnership with Doorzetters, the weekly podcast and vodcast of entrepreneurial-thinking Netherlands.
  

Market Update

A week ago, the crypto market was calm, and the sentiment was optimistic. Various indicators showed confidence returning. The price was around $67,000 with a solid zone between $61,000 and $63,000 below. We wrote: “If no major shocks occur, the price will likely find support here.”

In recent days, we have seen such a shock. Financial markets became cautious late last week due to suddenly weaker economic data in the US. But the biggest blow was dealt by the Japanese central bank, which raised interest rates, leading to a stronger Japanese yen.

Globally, investors have borrowed trillions of dollars in Japanese yen to buy risky investments. They had to sell those to repay their yen-denominated loans. In three days, the Japanese Nikkei index lost 20% and the American Nasdaq index 10%. Huge movements for such large markets.

This also affected the crypto market. The price of bitcoin fell 25% in four days from $65,000 to $49,000 on Monday, August 5. The price did not spend much time around the lowest point; the daily close was at $54,000, and today the price is around $57,000.

At the lowest point, the price was 34% below the peak of March 14. This makes this correction the deepest of this market cycle. Previous corrections were always between 20% and 22%. In previous bull markets, we regularly saw corrections of around 35%.

A characteristic of a turbulent period is that altcoins react even more strongly than bitcoin. The price of ETH fell by 35% while BTC fell by 25%. Many smaller altcoins performed even worse.

Over the past year, SOL was one of the strongest coins. But the Solana network’s coin also took a hard hit. At its lowest point, the price fell below the significant $120 mark, showing a 48% loss. It’s important to see this price drop in the context of the spectacular rise in the previous period. Compared to September 2023, SOL is still up more than 500%.

The outlook for the crypto market is now closely tied to the rest of the financial market. How will regulators and policymakers react? Will we enter a negative spiral ending in a deep recession? Or will an ample support package provide sufficient backing and confidence? No one knows for sure. Only in hindsight will we know if this was a great entry point or a good exit point!

News Overview

The crisis of the 1930s was the greatest economic depression of the twentieth century. The stock market crash of 1929, where stock prices on Wall Street in New York dramatically collapsed, is often cited as the cause. It became one of the most tumultuous periods in financial history.

During this period, American economist and asset manager Benjamin Graham lived and worked. The stock market was unstable, investors lost their savings, and the future seemed uncertain. Graham saw that the market in the short term was driven by emotions and speculation. Stocks were bought and sold like votes in an election, based on popularity and panic.

Graham put his reflections on paper and published his book Security Analysis in 1934. In it, he wrote: “The stock market is a voting machine rather than a weighing machine. It responds to factual data not directly but only as they affect the decisions of buyers and sellers.” This insight was shortened and supplemented by Warren Buffett in 1987: “In the short run, the market is a voting machine but in the long run it is a weighing machine.” Benjamin Graham was a significant mentor to Warren Buffett for many years.

Fast forward to today. The Japanese central bank unexpectedly raised the policy rate, causing shockwaves that affected almost all financial markets. The American economy is on the brink of recession, and geopolitical tensions are rising. Stocks fell sharply, and the bitcoin price took a hit. Investors panicked.

At such a moment, Graham would remind us that markets are driven by emotions in the short term. The sharp declines are largely caused by fear and uncertainty, not by fundamental changes. Take bitcoin, for example. Despite the recent declines, bitcoin’s fundamental value is unchanged and perhaps stronger than ever, thanks to growing acceptance and infrastructure.

Graham’s vision is perhaps more important today than ever. In a world where news can quickly shake markets, his long-term perspective offers calm and rationality!

Other news: 

• Bitcoiners Celebrate Independence Day: Seven years ago, a fierce battle took place over the best way to improve bitcoin’s efficiency. A consortium of wealthy and influential players wanted to double the block size to their advantage. Opposing them were small players, end-users, and developers. The moment they managed to implement their proposal, keeping bitcoin’s decentralization intact without the approval of the heavyweights, is now known as Bitcoin’s Independence Day. August 1 is the day the fight for the independence of the bitcoin network was won!
• Ethereum Network Healthy Despite Price Crash: The price of ether has dropped by more than 30% in a week. Nevertheless, the line of exiting validators is small. Almost ten times more validators are waiting for approval to join the network. In total, there are 1,055,626 active validators, and 33.7 million ether (28% of the total) is staked.
• Morgan Stanley Advisors Can Sell Bitcoin Funds: It is the first Wall Street bank to give its army of financial advisors groen licht geeft the green light. According to CNBC, shares in the funds of BlackRock (IBIT) and Fidelity (FBTC) can be purchased from August 7. Insiders call this a significant turning point. “They have examined it and decided it’s important. The train is leaving the station!” writes Bitwise CEO Hunter Horsley.