In a scene that reflects the crypto market's vulnerability to external factors, major cryptocurrencies experienced a dark red day, with investment portfolios turning red. What drove the market to this sudden decline? What factors prompted traders to abandon their digital assets so quickly? Three main factors lie behind the current scene:
1. US economic data shakes confidence but does not reassure markets.
Markets typically react strongly to US jobs reports, but July's report delivered an unexpected disappointment. Employment figures were unusually weak, and revisions to previous months revealed gross overestimations of job growth.
Ironically, markets didn't read this decline as a mere temporary failure, but rather as a sign of a deeper dysfunction at the heart of the American economy. When combined with a sudden surge in long-term unemployment, it becomes clear that the market is beginning to react to the idea that a recession is no longer a theoretical possibility, but rather a steadily approaching threat.
2. Unprecedented political interference undermines the credibility of institutions.
Beyond the language of economics, political interference from the White House has exacerbated tensions.
The US president issued harsh statements accusing the Census Bureau commissioner of manipulation and ordering her dismissal. In political terms, such actions are considered a dangerous sign of government interference in independent institutions.
For investors, the political leadership's questioning of the accuracy of official economic data opens the door to skepticism and undermines one of the most important foundations for market decision-making: trust in numbers. Is it possible to build investment expectations in an environment where numbers are accused of being part of a political game?
3. Unconventional military messages that bring back the specter of the Cold War.
In an unexpected development, the US President resorted to an informal method to announce military movements, including US nuclear submarines, in response to Russian statements.
Although the escalation did not turn into a confrontation, the tone and approach raised real fears of a more tense phase in relations between the major powers.
These messages were interpreted in markets as an indication of a loss of balance in foreign policy, prompting many investors to flee to safer instruments, such as the dollar and Treasury bonds, at the expense of highly volatile digital assets.
Markets are on the defensive: No one is betting on the near future.
Although a rate cut is now highly likely at the next Federal Reserve meeting, the general mood in the markets did not celebrate the move.
Under normal circumstances, a rate cut would support the market. Today, however, it is read as an official admission that the economy is suffering and that monetary policy is now in a position of reacting, not leading.
Cryptocurrencies, whose movements are often linked to technology stocks and high-growth assets, reacted sharply to this pessimistic outlook.
Instead of representing a buying opportunity, this phase was considered a withdrawal and waiting phase.
Result: Elimination season, no time for betting
It is clear from the above that the digital market did not collapse due to a single factor, but rather as a result of an accumulation of economic, political, and psychological factors.
Uncertainty has become the norm, and investors no longer dare to remain short.
In the absence of any clear reassuring signs, this “risk-off” tendency is likely to continue to dominate, at least in the short term.
Ultimately, the question now may not be "When will the market rise?" but "What is the minimum it might reach before it stabilizes?"