Recent Market Tumble

Just when we thought things were settling into a rhythm, the market decided to throw us another curveball. Watching Bitcoin dip below $58,000 and Ether hit a 7-month low made me reflect on the volatility of this digital frontier we have all grown to love and sometimes fear.

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How intertwined the crypto market has become with traditional financial indicators.

It coincided with the sharp fall in the U.S. stocks after the Labor Day weekend. The connection between crypto and conventional markets is something that I have been noticing more and more these days. It is as though Bitcoin and its digital cousins are no longer maverick outsiders but increasingly dancing according to the tune of broader economic influence.

The August ISM Manufacturing PMI report drew my attention with its continued contraction in the manufacturing sector. What hit me was the combination of sliding new orders with increasing prices. This is a kind of stagflation scenario that could hit very far from the crypto ecosystem. It reminded me that we cannot look at digital assets as an island but as part of one big, chaotic economy in general.

The greater point of interest, however, is what the Federal Reserve may do.

The probability of a serious rate cut in September has risen and is perhaps a surefire bomb for crypto markets. In the past, when monetary policy has slackened, that has tended to be a good time for risk assets like cryptocurrencies to thrive.

These are not normal times, however.
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I'm also paying close attention to the upcoming August employment report. It may be the determining factor in the Fed's decision-making process, and a great jobs report would take away some fears and, on the other hand, also cut the possibility of aggressive rate cuts. It is a fine balance, so let's wait and see how that affects the crypto market.

I am pleased to state that, even with the current downtrend of the market, my prospects for long-term success with cryptocurrencies are still very positive.

The periodic corrections are unsettling, but this is usually how it shakes out weak hands and cleanses overall markets. The setback provides opportunities for me to add to my position at more favorable prices since I'm still confident about the technology.

That is not to say there have not been several resilient altcoins during this downturn. The fact that the likes of Lumens and Litecoin are bucking the trend is at least an indication that within the space, some considered investment is being made, as opposed to simply a blind sell-off across the board.

It is the long-term perspective that keeps coming into my mind as we navigate these stormy waters.

Day-to-day fluctuations are quite unnerving, but when you step back, most of the time, the picture is altogether different. The underlying technology and potential of blockchain and cryptocurrencies remain as promising as ever.

Posted Using InLeo Alpha