Crypto Assets and Financial Markets Regain Stability After Recent Drops

Despite traditionally low correlation between major tokens and other asset classes, recent volatility in traditional markets has weighed on crypto valuations.

The decline began after a weaker-than-expected US employment report was released on August 2. The report pointed to a rise in the unemployment rate reminiscent of past recessions, raising fears of an economic downturn.

This led to weaker performance in cyclical assets like stocks, while strengthening traditional safe havens like US Treasuries, the Japanese Yen, and the Swiss Franc. Non-US stocks and strategies that bet on US stock volatility also underperformed.

While both Bitcoin and Ethereum experienced declines, Bitcoin performed relatively better on a risk-adjusted basis. However, Ethereum underperformed compared to other crypto assets and many traditional market segments.

Historically, Ethereum’s price has typically fallen by about 1.2x Bitcoin during downturns. The last “crypto winter” saw Ethereum fall approximately 1.8 times more than Bitcoin, indicating unparalleled downward pressures.