Keeping Your Cool in the Crypto Market Meltdown

Panic selling surged as Bitcoin dropped below $50k earlier today, with paper hands rushing to dump their tokens, fearing a crypto apocalypse. We’re calm in the midst of the storm, though, because it’s something our CEO, Marius Martocsan, predicted in a video last week.

In the past 24 hours, over $1 billion has been liquidated in the crypto market, according to data tracker Glassnode. Over $900 million were long positions, betting that prices would go up, while $100 million were the opposite, shorts.

The cause of today’s market crash has nothing to do with crypto, per se; it actually started on Friday in Japan. The central bank in Japan has been struggling with its monetary policy and it was facing the potential collapse of its $20 trillion yen carry trade amid rising inflation.

They are caught between tightening monetary policies, risking a collapse of the carry trade, or maintaining low rates, which threatens financial stability. All of that began to hit the markets on Friday, and then on Monday, the crash began.

The Nikkei closed today at a historic low, 13.5% down, which caused major ripples through every other financial market. The Istanbul exchange suspended trading when circuit breakers kicked in, not once but twice.

European markets opened lower and everyone is eyeing the U.S markets to see what they’ll do. Already in pre-market contracts the Nasdaq is down over 6%.

Part of the problem stems from the old-fashioned way that traditional financial markets operate. They close on Friday afternoon and reopen on Monday mornings. Also, these are local times, so bad news hits the market repeatedly as different exchanges open.

There are 2 main reasons why no one in crypto should be panicking right now. Firstly, this is normal for this phase of the cycle, as Marius explained last week:

Bull runs don’t happen overnight, they take time to build. My guess is that right now, we are in the shake-out phase. This is the part where most people start to doubt, start to worry.

This is the phase where real projects like Zesh are building. Stay strong, don’t lose hope. Your patience and dedication will be rewarded.

The second reason not to worry is that the current situation will lead to central bank rate cuts, which will increase liquidity in the markets. When banks cut rates, people sell bonds and look for higher returns in the stock and crypto markets.

There are already indications this is taking place. European credit default swaps (CDS) are surging in price today following the Black Monday crash.

A CDS is a way of buying protection against high-grade corporate bond defaults. Their increasing value indicates that the bond market is weakening, which is essential to driving significant sums of liquidity into crypto.

While the headlines will be filled with fear, the current situation is actually good news for crypto. It means that central banks have no choice but to cut rates and cut them fast, much quicker than they previously intended to.

So stay calm, and don’t worry. This is an indication that the bull run is on course and will more than likely begin in the next few months.