The global market is in turmoil, and crypto is no less than a boiling volcano. South Korea’s stock market fell 4%, hitting correction status, while Japan braces for its worst two-day drop ever, even worse than Black Monday in 1987. Big Crash in the Stock Market is yet to come?
Many red flags are showing up:
The NASDAQ is in correction, the S&P 500 is close, and volatility has doubled in a month. Top stocks are down 20% from their highs, Bitcoin is having its worst week since the FTX collapse, and crypto is crashing. The U.S. is heading into a recession, with the Sahm Rule triggered, and the Fed is expected to cut rates three times by year-end.
BREAKING: Japan's stock market, the Nikkei 225, is currently set to post its largest 2-day drop in history.
— The Kobeissi Letter (@KobeissiLetter) August 5, 2024
This is an even larger drop than the Black Monday crash of 1987, per Zerohedge.
Now, South Korea has halted ALL sell orders as markets crash.
Panic selling has arrived. pic.twitter.com/eoxEeaxIh8
Japan’s Market Plunge
Japan’s Nikkei and TOPIX indices have fallen by over 8% each, marking the country’s worst stock market loss since 1987. Both indices have dropped by about 20% from their all-time highs on July 11. Popular trading houses like Mitsubishi, Mitsui & Co., Sumitomo, and Marubeni have all plummeted by around 10% each. Monday’s crash followed a dip on Friday when the Nikkei and TOPIX plunged 5% and 6%, respectively. The market drop was likely caused by the Japanese central bank raising interest rates to reduce government bond purchases.
In response, South Korea has halted all sell orders as markets crash, signaling the arrival of panic selling.
Impact of Yen Devaluation
On Monday, the yen hit its lowest level against the US dollar since January 2024, reaching 142.77. Kelvin Tay from UBS Global Wealth Management explained that the recent strength in Japanese stocks was due to a weak yen. With the yen now reversing, investors are quickly exiting the market.
Other Factors Casing the Dip
Warren Buffett sold more stock last quarter than any time before, signaling potential concerns about the market’s direction. Plus, the recent surge in crypto prices attracted many new investors, but as the market reverses, these positions are being liquidated, worsening the downward momentum.
The Federal Reserve’s Role
The US market may have contributed to Japan’s current situation. The Federal Reserve is undecided about cutting US interest rates in September, as markets expect. Investors may have panicked due to this uncertainty, causing a selloff. The Japanese Central Bank governor, Kazuo Ueda, said, “If the economy and prices move in line with our projection, we will continue to raise interest rates.”
Crypto Impact
Bitcoin dropped 17% to $50,350 from $70,000, causing the crypto market to lose $1.04 billion in 24 hours. This included substantial losses from both bullish and bearish investors. Trading below its 200-day moving average, Bitcoin risks further declines, with altcoins potentially facing even steeper drops. The interconnected global financial markets are contributing to this volatility, creating significant instability as investors and analysts watch for signs of stabilization.
