Bitcoin and Ethereum have been on a downward trend since the beginning of September. This slump in the crypto market is mainly due to a few big economic factors.
The Yen Carry Trade is Still Affecting Crypto
The Japanese Yen has been strengthening against the US dollar, causing investors to unwind their carry trade positions. This involves borrowing Yen at low interest rates and investing in riskier assets like cryptocurrencies. As investors pull out of these positions, they are selling off their crypto holdings, pushing prices down.
The Bank of Japan (BOJ) recently hinted at further interest rate hikes, which also spooked investors and led to more selling pressure on Bitcoin and Ethereum. This is a continuation of the trend that started in August, when the BOJ’s first rate hike caused a major crash in the crypto market.
The US Stock Market is Dragging Crypto Down
Bitcoin and Ethereum are closely linked to the US stock market. When the stock market takes a hit, cryptocurrencies tend to follow suit. On September 3rd, the US stock market lost over $1.05 million, causing a wave of sell-offs in the crypto market.
This was reflected in the significant outflows from Bitcoin and Ethereum ETFs, with investors pulling out a combined $335.2 million.
Hoping for a Turnaround
The crypto community is hoping for a boost from the US Federal Reserve. They are hoping for a cut in interest rates at the next FOMC meeting, which could inject some much-needed liquidity into the market and help Bitcoin and Ethereum recover.
For now, Bitcoin and Ethereum are trading at around $57,160 and $2,400 respectively. It remains to be seen whether the market will find its footing soon or if the downward trend will continue.
