Crypto Market Rebounds 8% after $750 Billion Crash: More Gains Ahead?

Crypto Market Analysis

The global cryptocurrency markets experience a historic downturn on Monday Aug 5, wiping out over $750 billion attributed to several bearish catalysts, however markets analysts and industry experts anticipate an instant bullish reversal.

Crypto Market Sheds $750B During Monday Bloodbath

Over the past, major mainstream crypto assets have fallen sharply. In the spot markets, Ethereum (ETH) fell by more than 60% while Bitcoin (BTC) declined 30%. Likewise, the derivatives market has seen a liquidation of $827M including long orders of nearly $720M.

Looking at the chart above, the global crypto market had lost over $750 billion between July 29 and Aug 5. However, at the time of writing on Aug 7, the market has now rebound by 8%, to reach the $1.97 trillion valuation.

3 main reasons have been highlighted as major causes of the market crash:

First, the global economy is alerted with geopolitical tensions and the US economy is facing recession pressure. The US stock market has fallen for three consecutive trading days, while the Japanese stock market has been in a circuit-breaker for two consecutive trading days.

According to Alernative.me data, the current market panic index has fallen to 26, and the market is in a “panic” mode. There are multiple reasons for the flash crash and bearish behaviour in the market. The panic index VXX soared 27% in a single day indicating the macro financial market is under great pressure for correction, causing wider market selling.

The emotional impact of large institutions’ market actions also play a role, with Berkshire Hathaway cash pile surging after selling Apple and Bank of America stocks in the past 12 trading days. Warren Buffett sold stocks and now holds cash in large quantities, affecting the overall sentiment of the market.

On the crypto front, Jump Crypto, a leading market maker in the crypto market, sold ETH, causing the price to fall sharply after analysts bet downfall post ETF approvals.

Bitget Exchange CEO Hints at Early Recovery

On the bright side, many whale investors capitalized on the market crash to bolster their crypto holdings. Consequently the market has rebound 8% within the last 24-hours.  Bitget exchange CEO Gracy Chen has hinted the wipeout on Monday, could be a precursor to a prolonged bull rally.

Judging from historical trends in the crypto market, before the market forms a true bullish drive, it needs to experience a sharp decline to reduce the long positions of the contract in order to reduce the selling pressure for future rises.

Gracy Chen – Bitget CEO.

Stablecoin flows observed over the past week also supports this optimistic outlook. During periods of intense fear and volatility, investors often trade altcoins for stablecoins, to avoid losses amid the market crash.

Looking at the Coinmarket chart below, we see how the Stablecoin trading volum surged to $175 billion on Monday Aug 5, as investors sought refuge from the market bloodbath.

But at the time of writing, on Aug 7, that figure has declined by more than half, standing $97 billion.

When investors trade less in stablecoins, it often indicates that they are beginning to feel more confident about the market’s direction.  The recent decrease in stablecoin trading volume from $175 billion to $97 billion suggests that fear may be subsiding and that investors are starting to reallocate their funds back into other assets.

This shift could be a signal of a potential market rebound, as decreased stablecoin flows might indicate a transition from defensive to more risk-on behavior.

If this trend continues, it may be a sign that market sentiment is improving and that a recovery could be on the horizon.

Monitoring stablecoin flows in the coming days will be crucial to confirm whether this is the beginning of a broader market stabilization or just a temporary pause in the downturn.