Bitcoin Rebounds Past $56,000, Ethereum Over $2,500: Key Factors

Jake Simmons

1 year ago

3 mins read

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Bitcoin and crypto markets experienced a robust recovery Tuesday, with Bitcoin surging past the $56,000 mark and Ethereum breaking above $2,500, bouncing back from the “Block Monday.” Yesterday, Bitcoin plummeted over 15%, touching lows near $49,000, while Ethereum dropped by more than 20% to a low of $2,115. The recovery in Bitcoin and crypto paralleled a broader resurgence in global financial markets, driven by several key factors.

#1 Nikkei Rebounds, Bitcoin Follows

Japan’s primary stock index, the Nikkei 225, experienced a record-breaking recovery following its most significant drop since the 1987 Black Monday crash. The index surged by 10.23%, closing at 34.675,46 points. This rebound came after a sharp 12.4% decline on Monday, spurred by global market instability and looming recession fears in the US, alongside complications arising from the unwinding of the Yen ‘carry trade.’

Popular crypto analyst JACKIS (@i_am_jackis) remarked via X: “I think that crypto right now is reacting to macro conditions but nothing specific IMO is happening to crypto itself. Here is BTC & Nikkei in comparison. When macro conditions settle Bitcoin / crypto should rebound stronger but until then be careful.”

Nikkei vs Bitcoin | Source: X @i_am_jackis

#2 ISM Services Data Is Bullish

The US Institute for Supply Management reported on Monday that its non-manufacturing PMI rose to 51.4 in July from June’s 48.8, which was the lowest since May 2020. This index measures the health of the services sector, which constitutes over two-thirds of the US economy. A PMI above 50 suggests expansion, and the latest data indicates a rebound in service sector activity, easing some concerns over an impending recession.

Eric Wallerstein of Yardeni Research expressed relief and cautious optimism about the data: “Woah, maybe the US economy is not crashing? ISM services employment up 5 points to 51.1. Entire PMI in expansion,” he stated via X.

Andreas Steno Larsen of Steno Research also commented, highlighting the precariousness of market sentiment: “ISM Services away from the recession zone again. Not sure it is strong enough to convince Markets. We are not trading macro currently. We are trading leveraged stops.”

Ram Ahluwalia, CEO of Lumida Wealth, added: “ISM Services are *up* reversing the signal from the ISM Manufacturing data last Friday. No recession folks. This is a technical / positioning driven correction. Consider that Earnings are up 12% YOY vs Consensus of 9%. That doesn’t happen at a Recession turning point.”

#3 Market Anticipates Aggressive Fed Rate Cuts

The financial markets are currently pricing in significant monetary easing by the US Federal Reserve. According to the CME FedWatch Tool, there is now a 73.5% probability of a 50 basis points rate cut by September, with a minimal rate cut of 25 basis points now seen as certain. This shift in expectations reflects a drastic change in sentiment compared to just a week ago when the probability of such cuts was much lower.

Matt Hougan, CIO at Bitwise, underscored the rapid shift in market dynamics: “One week ago, the market was pricing in an 11% chance of a 50 bps rate cut in September. Today, it’s 100%. Things come at you fast,” he remarked via X.

#4 Overblown Reaction

The market crash was also exacerbated by what some analysts are calling an overreaction to fears of a US recession. Macro analyst Alex Krüger pointed out the cyclicality of this fear-driven market behavior.

“The world suffering from a case of mass hysteria on fears of a US recession. A display of letting price action create a narrative that feeds into price action as everything spirals down in a negative feedback loop. VIX hits 65, third largest spike in history. Then a strong bounce comes this morning on the open while ISM data shows better than expected demand and employment growth,” Krüger remarked.

At press time, BTC traded at $56,010.

Bitcoin price, 1-day chart | Source: BTCUSDT on TradingView.com

Featured image created with DALL.E, chart from TradingView.com

Jake Simmons

Jake Simmons, a dedicated crypto journalist, has been passionate about Bitcoin since 2016 when he first learned about it. Through his extensive work with NewsBTC.com and Bitcoinist.com, Jake has become a trusted voice in the crypto community, guiding newcomers and seasoned enthusiasts alike towards a deeper understanding of this dynamic field.

His mission is simple yet profound: to demystify Bitcoin and cryptocurrencies and make them accessible to everyone.
With a professional career in the Bitcoin and crypto scene that began right after graduating with a degree in Information Systems in 2017, Jake has immersed himself in the industry. Jake joined the NewsBTC Group in late 2022. His educational background provides him with the technical prowess and analytical skills necessary to dissect complex topics and present them in an understandable format. Whether you are a casual reader curious about Bitcoin or an investor seeking to navigate the latest market trends, Jake’s insights offer valuable perspectives that bridge the gap between complex technology and everyday usage.

Jake is not just a reporter on technological trends; he is a firm believer in the transformative potential of Bitcoin over traditional fiat currencies. To him, the current financial system is on the brink of chaos, propelled by unchecked government actions and flawed Keynesian economic policies. Drawing from the principles of the Austrian school of economics, Jake views Bitcoin not merely as a digital asset but as a crucial step towards rectifying a failing monetary system. His libertarian views reinforce his stance that just as the church was separated from the state, so too should money be freed from governmental control.

For Jake, Bitcoin represents more than just an investment; it's a peaceful revolution. He envisions a future where Bitcoin fosters a sustainable and responsible financial framework for generations to come. His advocacy is not about opposition but about evolution, about laying the groundwork for a system that prioritizes transparency and equity over secrecy and inequality.

As a journalist, Jake’s articles are crafted with the precision of a scholar and the passion of a true believer. He provides not only news but also thoughtful analysis that connects the dots between daily developments and larger economic theories. His work is a beacon for those lost in the technical jargon often associated with crypto discussions, illuminating the practical implications and benefits of these technologies.

In summary, Jake Simmons is not just reporting on a revolution; he wants to be part of it, fully committed to enhancing public understanding and adoption of Bitcoin and cryptocurrencies. His work is more than just a collection of articles; it’s a resource, a guide, and a companion for anyone ready to explore the potential of this digital frontier. Whether you are taking your first steps into crypto or are a veteran looking to stay on top of the latest trends, Jake’s insights provide clarity and foresight in an often unpredictable industry. Join him on this journey to reshape the world of finance, one post at a time.

You can engage with his latest takes on Twitter: @realJakeSimmons.

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