Bitcoin's near 20% drop to below $50,000 on August 5 and Ethereum's 22% decline were the result of several global developments. A lower-than-expected manufacturing purchasing managers' index in the US was interpreted as a sign of economic cooling, raising recession concerns in the markets. At the same time, Japan's economic contraction and Israel's escalating tensions in the Middle East were among the factors that increased global uncertainties and concerns among investors. This led to a wave of sell-offs, especially in Asian markets, which created a domino effect globally and led to sharp declines in cryptocurrency markets.
The Fed's interest rate cut expectations were also effective in this uncertain environment. According to the Wall Street Journal, the rise in the US unemployment rate and weak economic indicators have increased the likelihood that the Fed will cut interest rates later this year. Major financial institutions such as Citi and JPMorgan put the probability of a 25 basis point cut in September at 78%. These developments have shaken investors' confidence in crypto assets and led to increased volatility in the market.
