The cryptocurrency market has seen a major drop in the past 24 hours, with Bitcoin falling 15% to a low of $49,000 on Binance (BTC/USDT), a significant departure from last week’s $70,000 peak — a 26% crash. Similarly, Ethereum (ETH) fell 39% from $3,400 to $2,100. This downtrend was not isolated, but echoed across the spectrum of altcoins, which saw even bigger declines.

#1 Recession Fears Cause Bitcoin Crash

The initial spark of the current market volatility appears to be coming from mounting fears of a U.S. recession, sparked by unexpectedly frail U.S. labor data on Friday. The July report showed an escalate of just 114,000 jobs — well below Wall Street’s forecast of 175,000. That was the weakest job gain since December of last year and nearly the lowest since the COVID-19 pandemic began in March 2020.

Charles Edwards of Capriole Investments he noticed via X, “Whenever the unemployment rate rises like it did today, we have a recession. Just as the Fed was too slow to tighten policy in 2021, it looks like it will be too slow to ease policy in 2024.”

The market nervousness was further fueled by the revelation that Warren Buffett’s Berkshire Hathaway had sold about 50% of its stake in Apple. The sell-off by one of the world’s most closely watched investors was interpreted as a hedge against potential market downside, given that Berkshire Hathaway disclosed a record $277 billion in cash in its second-quarter report.

In addition, the Bank of Japan’s decision to raise its key interest rate to around 0.25% from a range of zero to around 0.1% had significant implications. The rate hike, the second since 2007, sent shockwaves through financial sectors around the world. Historically, Japanese central bank rate hikes have been a precursor to global recessions. Following the announcement, the Nikkei experienced its biggest two-day decline in history, surpassing even the declines seen on Black Monday in 1987.

Nick Timiraos, often called the “Federal Reserve spokesman” and a Wall Street Journal reporter, revealed“Goldman Sachs says there is good reason to believe the rising unemployment rate in July’s frail overall payroll report is not as scary as usual… But it is raising its odds of tracking a recession to 25% from 15%.

Goldman Sachs also revised up its expectations for the Federal Reserve’s response, predicting interest rate cuts at each future meeting, with the possibility of a more aggressive 50 basis point cut if the August jobs report mirrors July’s weakness.

#2 Yen Carry Trade Reversal

The market decline was further exacerbated by a significant move in forex markets, particularly in the Japanese yen. After the Bank of Japan raised its key interest rate, the yen appreciated significantly against the U.S. dollar. The move put pressure on traders who had been participating in the yen “carry trade,” borrowing yen at low rates to buy higher-yielding U.S. assets.

Adam Khoo recorded“The JPY/USD surge is causing a massive unwinding of yen carry positions and contributing to the sharp decline in US stocks.” The reversal of these trades has likely not only affected currency and stock markets, but has also had a cascading effect on Bitcoin and cryptocurrencies as assets are liquidated to cover losses and pay off yen-denominated liabilities.

BitMEX founder Arthur Hayes commented via X: “My TradFi birds tell me someone big got screwed and is dumping all the #crypto. No idea if that’s true, won’t mention names but let your family know if you’re hearing the same thing?????”

#3 Jump Trading and Large Sellers

There have been unusual sell orders on major exchanges like Kraken, Gemini, and Coinbase, mostly on Sunday, which is typically a quieter trading day. This suggests organized activity by enormous players, potentially including the unwinding of positions by firms like Jump Trading.

Jump Trading has reportedly been involved in a significant Ethereum sell-off, worth around $500 million over the past two weeks. Market rumors suggest the company’s sell-off could be a strategic exit from its cryptocurrency market-making ventures or an urgent need for liquidity. Ran Neuner commented via X: “I’m watching this Jump Trading sell-off […] They are the smartest traders in the world, why are they selling so swift on a Sunday with low liquidity? I imagine they are being liquidated or have urgent obligations.”

Dr. Julian Hosp, CEO of Cake Group, he suggested on X: “The reason for the crazy sell-off in cryptocurrencies seems to be Jump Trading either receiving a margin call on traditional markets and needing liquidity over the weekend, or getting out of the crypto business due to regulatory reasons (related to Terra Luna). The sell-off is ongoing at this point.”

Also Mike Alfred illuminated the possibility of market turmoil, suggesting that a enormous Japanese fund may have collapsed while holding significant amounts of Bitcoin and Ethereum. “A large Japanese fund blew up. Unfortunately, it held some Bitcoin and Ethereum. Jump and other market makers sensed the turmoil and tightened the move. That’s it. Game over. Let’s move on to the next one,” Alfred said.

#4 Liquidation Cascade Deepens Bitcoin Price Crash

The market has seen a surge in liquidations, with CoinGlass reporting that 277,937 traders were liquidated in the past 24 hours, leading to a total liquidation of around $1.06 billion worth of cryptocurrencies. The largest single liquidation order, worth $27 million, occurred on Huobi for a BTC-USD position.

According to CoinGlass, a total of $302.07 in long Bitcoin positions were liquidated in the last 24 hours. dataThese forced liquidations, fueled by margin calls and stop-loss orders, have intensified downward pressure on cryptocurrency prices, pushing them even further down.

#5 Trump’s momentum is fading

Another less significant factor could be the changing political landscape, with Kamala Harris gaining over Donald Trump according to Polymarkets (Harris 43% vs. Trump 55%). This change is being viewed negatively by the Bitcoin and cryptocurrency markets. The overall market favors a Trump victory. He wants to build a “strategic Bitcoin stockpile” and said over the weekend that BTC could be used to pay down the $35 trillion in US debt.

#6 Mt. Gox Distributions Continue to Impact Market Liquidity

Finally, the ongoing distribution of Bitcoin from the defunct Mt. Gox exchange continues to impact the market. As former users of the exchange receive and potentially sell their returned Bitcoin, this has increased selling pressure in the market, driving prices even lower.

At the time of going to press, BTC had rebounded from support and reached $52,909.

Featured image created with DALL.E, chart from TradingView.com