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Why is the Crypto Market Down Today? Time to Buy the Dip?

Why is the Crypto Market Down Today? Time to Buy the Dip?

The first week of August 2024 got off to a miserable start for risk asset investors across the globe.

Major equity markets in the U.S., Europe, Japan, Australia, South Korea, and India were battered on August 5, 2024.

Bitcoin (BTC) mirrored equity market losses to fall below the $50,000 mark for the first time in nearly five months.

Meanwhile, Ethereum (ETH) bore the brunt of the selloff as the premier altcoin fell as much as 21% on the day.

Why is crypto crashing today? As we try and answer that, we will also look forward and analyze whether Bitcoin crashing is an opportunity to buy the dip.

Why is the Crypto Market Down?

The recent crash in cryptocurrency prices can be mainly attributed to macroeconomic factors:

U.S. Fed’s Rate Hike Cycle

Let’s rewind to March 2022, when the U.S. Federal Reserve (Fed) hiked interest rates for the first time in two years to quell inflation in the country. The March 2022 hike marked the start of a global monetary tightening cycle that saw central banks across the world raise borrowing rates to keep up with the Fed.

The Fed was very aggressive in its fight against inflation, raising interest rates from 0.25% in March 2022 to 5.5% by July 2023.

The last time the Fed undertook such a strong measure — raising rates from 1% in June 2004 to 5.25% in June 2006 — it was preceded by the Great Recession of 2007-2008.

Investors now fear that history could repeat itself, having seen unemployment rates in the U.S. rise consistently over the past year. A contraction of U.S. factory activity for four straight months between April 2024 to July 2024 has also reinforced recession fears.

“Historically, the likelihood of a recession in 2025 is high, and the stock market typically anticipates such downturns well in advance,” said  Markus Theilen of 10x Research in a note.

The crypto crash today may also make sense when we understand that the institutionalization of cryptocurrencies has made the digital asset market more sensitive to macroeconomic forces than ever before.

Financial institutions, hedge funds and professional investors are selling Bitcoin and altcoins as they prepare for a potential recession.

Anndy Lian, intergovernmental blockchain expert and author of ‘Blockchain Revolution 2030’ told Techopedia:

“Global recession fears can significantly impact cryptocurrency prices, primarily due to investors’ heightened risk aversion. When economic indicators suggest a potential downturn, investors often shift their capital from riskier assets like cryptocurrencies to safer investments such as government bonds or gold.

“This flight to safety can lead to a sell-off in the crypto market, driving prices down.”

Unwinding of Japanese Yen Carry Trade

Many also attributed the fall in the risk asset market that occurred in early August 2024 to the unwinding of the Japanese Yen carry trade.

The Japanese central bank has historically maintained zero-to-negative interest rates in order to boost economic activity and counter deflation in the island nation.

However, in March 2024, the Bank of Japan (BoJ) ended the era of negative interest rates for the first time in 17 years by increasing short-term interest rates to 0-0.1%.

On July 31, 2024, the BoJ raised rates further to 0.25%, making it more expensive to borrow the Japanese yen.

The Yen had been a favourite among investors as a carry trade option, where investors borrow money at a lower interest rate to invest the borrowed sum in assets that can provide higher returns.

“The BoJ’s rate hike last week (on July 31, 2024), which played a key role in the subsequent market meltdown, showed that you can’t unwind the biggest carry trade of the century without breaking a few heads,” said Presto Research in an email newsletter.

Should I Buy the Dip?

With BTC trading over 26% below its all-time high price ($73,750 in March 2024) and ETH trading at six-month lows, investors may be thinking of buying the crypto dip.

We asked Techopedia’s panel of crypto experts for their thoughts on the subject.

Shiven Moodley, chief operating officer and macro strategist at brokerage firm 80eight Group, said:

“As a trader, I am buying the dip. Support levels of around $42,000 and $38,000 (for BTC) support accumulation in my thesis that the price will move back above $75,000 towards the end of the year.

“There is positive long-term anticipation for price action ahead of the election in the U.S.”

Meanwhile, Sergei Chmel, managing partner of alternative investment firm SeQuant Capital quoted legendary investor Warren Buffet and said:

“Be brave when others are fearful, and be fearful while others are brave.

He added: “DCA [dollar cost averaging] is the best strategy for a long-term horizon. Trading is a path to poverty.”

Interestingly, Buffett’s company, Berkshire Hathaway, seems to have followed his advice by selling 390 million Apple shares in the second quarter of 2024, just before Apple shares hit an all-time high in mid-July 2024. Berkshire Hathaway held a cash stake of over $276 billion as of June 30, 2024

Elsewhere, 10x Research warned that long-term investment strategies like HODLing and DCA in BTC and ETH have not been favorable since 2021.

“Bitcoin is primarily a momentum trading game where the trend is your friend—until it isn’t. While we can outline potential cycle developments, trading the peaks and troughs requires reacting to breakdown or breakout signals.

“This approach might result in losses when false buy signals occur during rallies, but effective risk management, such as using stop-loss orders, can protect most traders’ capital.”

BTC Hedge Criticism

Crypto’s crash alongside global equity markets in early August 2024 invited criticism from a section of the crowd who questioned the popular crypto narrative that Bitcoin is a hedge against global economies and a good asset for diversification.

Joe Weisenthal, editor at Bloomberg, said Bitcoin – often dubbed “digital gold” – was looking “a lot more like Nvidia than it does gold.”

Elsewhere, Beat Nussbaumer, founder of MacroBeat, wrote:

“BTC dropped some 10% to 52.3K….that much for a store of value…. at some point, people will finally see it for what it is… just another risky asset.”

Michael Nadeau of the DeFi Report newsletter explained crypto’s correlated crash with the global equity market, saying:

“While crypto is generally uncorrelated to traditional markets, correlations quickly move to 1 during macro/liquidity events. All assets are correlated during these times, with crypto being much more volatile (why you never play with leverage).”

Outlook for Crypto Market

Macroeconomics will continue to be a key driver of risk asset markets over the near term as the U.S. Fed prepares to embark on a rate cut cycle that is expected to start in September 2024.

While rate cuts are typically seen as bullish events for risk asset markets, the underlying conditions — slow hiring, rising unemployment, and contracting manufacturing activity — have compelled investors to take a cautious stance.

“As noted earlier this week, if the Federal Reserve cuts rates after a prolonged hiking cycle solely due to weaker inflation, stocks (and Bitcoin) should interpret the first cut as bullish.

“However, if a weak economy drives the cut — as was the case in 2001 and 2007 — stocks (and Bitcoin) are likely to decline,” said 10x Research.

Looking forward, we asked Techopedia’s expert panels for their outlook on the crypto market.

Moodley said:

“BTC has some consolidation support levels of around $42k and $ 38k, which would interest many whales. While ETH has breached a two-standard deviation move, any more volatility could see us break the $2000 key support level toward $1800”

Sergei said:

“Regarding Bitcoin and its role as a hedge, one thing every investor should understand and remember about Bitcoin is that it is a perfect hedge in a medium-and-long term time horizon, but because it’s one of the most liquid assets in the world, in moments of panic investors rush to sell what they can.”

The Bottom Line

As this article goes to press, the crypto market has bounced back from the Monday market crash. Investors are buying the dip as we speak with BTC rising over 10% and ETH jumping over 14% on August 6, 2024 in early Asia trade.

If you are thinking of investing in risk asset markets, remember to always do your own due diligence before investing. Market analysts and experts can be wrong, and the future cannot be predicted. This article should not be taken as financial advice and is for informational purposes only.

 

Source: https://www.techopedia.com/news/why-is-crypto-market-down-today-time-to-buy-the-dip

 

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Crypto Insurance: Should You Buy It in 2024?

Crypto Insurance: Should You Buy It in 2024?

It has become evident that the decentralized finance (DeFi) industry will not be going anywhere, with a continuous launch of new projects, innovative financial instruments, and expanding user adoption.

As of 2024, Triple-A estimated that there are around 560 million cryptocurrency users worldwide. The number could be higher, as tracking an exact estimate is challenging due to cryptocurrencies’ decentralized nature.

However, the more the crypto industry expands, the more it becomes susceptible to hack attacks and exploitation. According to data published by TRM on Friday, by June 24, 2024, the value of stolen crypto doubled within a year from $657 million to $1.38 billion.

Such a stark increase might push crypto investors to consider purchasing crypto insurance.

What is it, and how does crypto insurance work? Here are what experts are saying.

Key Takeaways

  • The ever-growing crypto industry faces increased risks, including hacking and theft of assets, which makes crypto insurance essential.
  • Cryptocurrency insurance coverage policies typically cover theft, hacking, regulatory breaches, and professional errors.
  • Insurers tend to work with regulators to ensure compliance and comprehensive coverage.
  • Increasing user adoption and higher asset values drive the demand for larger coverage limits and innovative insurance solutions.

What Is Crypto Insurance?

In essence, crypto insurance follows the same principles of effective risk management as traditional insurance, Joseph Ziolkowski, the CEO and co-founder of Relm Insurance, an insurance provider specializing in the digital assets and Web3 industries.

The main focus of crypto insurance companies is to protect cryptocurrency holders and businesses against risks such as theft, hacking, and technical failure. It provides financial coverage for losses incurred due to such incidents and offers a safety net.

However, due to DeFi’s volatile nature, crypto insurance coverage might side-pass volatile market swings or accidental mistakes by the user, Anndy Lian, an inter-governmental blockchain adviser, added.

Additionally, Lian brought up the idea of DeFi insurance explaining that it utilized blockchain technology to create a community-driven pool for coverage losses thus eliminating the need for a traditional insurance company.

Demand For Crypto Insurance Heating Up

With the increase of cyberattacks on crypto exchanges and wallets, the demand for crypto insurance is surely on the rise which also coincides with the overall growth and mainstream adoption of the cryptocurrency industry.

Relm Insurance’s Ziolkowski noted that the company has observed significant growth in the crypto insurance market, particularly following the emergence of new regulations and as the ecosystem continues to build innovative solutions.

He added:

“The demand for crypto insurance has remained consistently strong, demonstrating resilience even through bear markets. In fact, due to this strong demand, Relm released a Web3 suite of products, including tailored and comprehensive insurance coverage for clients exploring or utilizing Web3 technologies.

“Our five distinct products directly address the nuanced risks faced by cryptocurrency exchanges, asset managers, technology developers, miners, token issuers, institutional staking providers, and other businesses operating within the ecosystem.”

However, Ziolkowski noted that the rising number of insurance claims is also prompting insurers to reduce their willingness to cover such types of risks.

Protection Against the Wild West of Crypto Risks

Unlike traditional coverage, crypto insurance tends to focus on eliminating specific threats the crypto industry may be more susceptible to, such as theft and hacking, lost crypto and keys, as well as cyber and tech errors and omissions.

Lian called crypto insurance’s coverage the protection “against the wild west of cryptocurrency risks” and noted that some of the most popular solutions include the protection against hacking and theft, which covers and safeguards crypto assets that may have been stolen during a security breach as well as the accidental or tech glitch-induced loss of custodians.

Relm Insurance’s Ziolkowski added that some of the most prevalent types of crypto insurance include Directors and Officers (D&O), Cyber and Technology professional indemnity, and Investment Managers Insurance coverage.

D&O insurance protects crypto companies and their executives from lawsuits, typically arising from alleged mismanagement, and includes three layers of coverage:

  • The protection of individual directors if they are sued and the company cannot indemnify them.
  • The reimbursement of the company for identifying executives’ names in lawsuits.
  • The coverage of the company’s expenses when both the company and executives are sued.

Cyber and Technology professional covers technology-related liabilities stipulated in contracts.

Finally, the Investment Managers Insurance coverage provides specialized coverage for investment managers overseeing cryptocurrency assets.

It typically includes protection against claims arising from professional errors, mismanagement, breaches of fiduciary duty, and regulatory violations. It can cover legal defense costs, settlements, and damages, safeguarding both the managers and the investment firm from financial losses due to these risks.

Crypto Insurance Companies “in Cahoots” With Regulators

Relm Insurance’s Ziolkowski noted that Relm works together with regulators worldwide to navigate the insurance requirements embedded within their legislative frameworks.

“It is crucial to recognize the substantial variation in these requirements: some jurisdictions mandate a single type of insurance, while others stipulate the necessity of eight or more insurance types.”

Ziolkowski brought up Hong Kong as an example which mandates that 50% of all assets under custody must be insured, a requirement not uniformly applied across all regulations.

Such regional disparities underscore the evolving landscape of regulatory frameworks, where insurance mandates increasingly establish credibility and legitimacy within the crypto industry.

Lian added that regulatory frameworks can often influence the types of risks covered by crypto insurance, thus highlighting the importance of cooperation.

“For example, regulations addressing smart contract vulnerabilities could pave the way for insurance against bugs or exploits within these digital agreements. Conversely, a lack of regulations around specific crypto activities might leave them uncovered by insurance.”

Crypto Insurance: A Promising Concept?

While speaking to Techopedia, Lian highlighted that crypto insurance is “a promising concept, but it is still navigating uncharted territory.”

“Unlike traditional insurance built on decades of data, crypto’s new and ever-changing landscape makes it difficult for insurers to assess risks and price coverage fairly.”

Additionally, crypto’s decentralized nature further clashes with traditional insurance models, which could make insuring digital assets a little more challenging as they are often spread across a number of digital wallets.

Relm Insurance’s Ziolkowski highlighted that a prominent trend observed by Relm is the increasing demand for larger coverage limits in slashing insurance, which reflects heightened risk awareness and exposure.

“Additionally, there’s a notable surge in dynamic insurance offerings entering the market, driven by client innovation. Companies’ exposures are expanding at a pace far exceeding that of traditional finance.”

Thus, the insurance for cryptocurrency may see more growth moving forward.

The Bottom Line

Crypto insurance has emerged as a crucial component in the rapidly evolving digital assets and DeFi industries. As the number of users and the value of digital assets continue to rise, so does the potential for risks such as hacking, theft, and regulatory challenges, forcing more investors to look into what is available in terms of asset safety.

Despite the challenges of insuring digital assets in a decentralized and volatile environment, the demand for comprehensive coverage is growing. By collaborating with regulators and developing innovative products, the crypto insurance sector is poised to play a pivotal role in securing the future of digital finance.

As the industry matures, the protection provided by crypto insurance will be indispensable for fostering trust and stability in the crypto world.

 

Source: https://www.techopedia.com/crypto-insurance

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Benzinga- People Hesitant To Buy Crypto Due to Lack of Knowledge: Study

Benzinga- People Hesitant To Buy Crypto Due to Lack of Knowledge: Study

Additional Comments by Anndy Lian:

Skeptics often argue that bitcoin was created out of thin air. Yet every Bitcoin is mined by solving complex cryptographic hash puzzles to verify blocks of transactions that are updated on the decentralized blockchain ledger. Skeptics can be reduced if you know what you are doing, there is a lack in the education of cryptocurrency in the space right now or should I say lack of proper knowledge sharing. People who are conducting masterclasses on how to use DEXes (Decentralized Exchanges) may not have traded on a DEX before. They do not understand how slippage works and so forth and where to import their contracts. If education is done well, the barrier of entry would be easier.

Many users that I know rely on hear-say information from the grapevine or they solely depend on mainstream papers. It is not good enough. They should look at reading online expert opinion articles and blogs where real users share their experiences. This would help them think wider and allow them to make sound decisions on what to do next.

Be the changemaker, don’t be the problem. Crypto changes minds, empower you to think beyond what you have learnt in textbook.

 

People Hesitant To Buy Crypto Due to Lack of Knowledge: Study

With over 100 million people globally using cryptocurrencies in 2021, the digital dollar has become a widely accepted way of saving and spending.

A new study, however, points out that the majority of those who have not invested in cryptos are either due to a lack of knowledge, massive fluctuations, or a perception that the digital currencies are a scam.

A study conducted by Coupon Follow also found out that Gen Z says further government regulations and crypto law enforcement is most likely to convince them to buy crypto and one in five people who have never bought crypto have downloaded a crypto exchange app at some point.

Coupon Follow surveyed 1,172 respondents over the age of 18 via SurveyMonkey and respondents were limited to those in the United States who had not yet bought or invested in cryptocurrency.

Gen Z, millennials, Gen X, and baby boomers were all included in the survey, with sample sizes ranging from 172 to 333 for each generation.

Hesitation due to lack of understanding

When respondents were asked about their aversion toward purchasing cryptocurrency, 42% said it was because they didn’t understand its value. Meanwhile, 39% were put off by the massive fluctuations in value that have plagued certain cryptocurrencies.

The third most common reason for hesitation was a concern that cryptos as a whole seemed like a scam. This sentiment was most common among baby boomers, 44% of whom selected it as their primary cause for pause.

Surprisingly, 18% of crypto skeptics have downloaded crypto exchange apps onto their phones but never ended up investing in any coins. The biggest reason for this sort of course reversal was a lack of knowledge about how to use the app or the currencies.

Interest Piqued?

Crypto investment interest seems to have taken a hit in 2022, with 61% of respondents saying they’re not at all likely to buy in this year. Only 6% of respondents who didn’t currently own crypto said they would be very or extremely likely to do so in the near future.

Looking forward to learning

The study results point out that interest in learning more about cryptocurrency is not dead. 6 out of 10 people were at least somewhat willing to learn more about cryptocurrency, even if they weren’t ready to spend money on it.

Experts say educating the masses is the need of the hour and relying on hear-say or sole dependence on the media is not good enough.

Anndy Lian, Thought Leader and Chief Digital Advisor to Mongolian Productivity Organization says people should look at reading online expert opinion articles and blogs where real users share their experiences.”

“This would help them think wider and allow them to make sound decisions on what to do next. Be the changemaker, don’t be the problem. Crypto changes minds and empowers you to think beyond what you have learned in the textbook,” Lian says.

Raj Kapoor, chief Advisor at Acryptoverse, a crypto blockchain and advisory firm, says for years crypto has seemed like the fleeting tech trend most people could safely ignore, however, its power – both economic and cultural – has become too big to overlook.

“The elephant is in the room. Can we kick it out? I don’t think so, so let us learn to dance with the elephant now,” he adds.

Original Source: https://www.benzinga.com/22/05/27286330/people-hesitant-to-buy-crypto-due-to-lack-of-knowledge-study

 

 

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j