On the morning of Friday, September 4, the cryptocurrency market suffered a sudden and violent correction that erased $70 billion from the total market capitalization of digital assets within less than 30 minutes.
The subsequent recovery proved to be only slight by press time on the same day, and the combined valuation remains at $2.66 trillion – roughly $50 billion below the $2.71 trillion held just an hour earlier.
Bitcoin (BTC), the world’s premier cryptocurrency, also experienced the plunge and fell from $81,252 to $79,341 at press time. The shockwave was also seen in the price of Gold, though the planet’s biggest commodity saw a larger recovery and is changing hands at $2,418.
Finally, the U.S. stock market also opened in the red, though the correction was significantly less deep, with the S&P 500 benchmark index being down just 0.17% shortly after the morning bell on Friday.
Why the crypto market wiped more than $50 billion in 30 minutes
Meanwhile, the market-wide bloodbath can be directly attributed to the latest U.S. jobs report. Specifically, the numbers came in far stronger than expected, showing a more robust labor market and removing a key concern with regard to increasing interest rates in September.
The Friday move could prove a harbinger of an even greater bearish correction next week since, should inflation figures also come in hotter than expected, a hike would become far more likely, especially given Fed Chair Warsh’s hawkish Jackson Hole speech.
What’s next for the crypto market in September
Elsewhere, the September 4 development came at a time of relatively high vulnerability for the cryptocurrency market.
After enjoying a strong rally late in August, Bitcoin seemingly entered a period of consolidation with investors and analysts awaiting confirmation that a new bull market is imminent.
Should the jobs report be followed by news of stubbornly high inflation, a significant BTC sell-off might take place, weakening the nascent bullish momentum.
Such an outcome could prove contagious and, possibly, even more damaging for smaller digital assets, due to the market concentration noted by Head of Research at CoinMarketCap, Alice Liu:
Our Altcoin Season Index sits at 26, down from 54 a month ago, as capital consolidates into Bitcoin. Yet our perpetual-contract scanner still identified unusual positioning across 72 altcoins. A narrow market is not a quiet one: speculation has concentrated, not disappeared.
Still, it is worth noting that the Friday morning developments leave few lasting consequences. The plunge could, within the cryptocurrency markets, also generate strong buying pressure, as multiple analysts have been awaiting a correction ahead of a renewed upsurge since late August.
Furthermore, next week’s report could still not trigger an interest rate hike due to the pressure to lower borrowing costs that the White House has been exercising essentially throughout President Donald Trump’s second term.
Featured image via Shutterstock
