US Market Crash Fears Overblown

The Breakdown First Five - Tuesday, August 6, 2024

Welcome back to The Breakdown First Five — the 5 most interesting and/or important stories in bitcoin, crypto, and markets to start your day.

5. Bitcoin Dominance Soars

To the extent that anything good came out of this weekend’s drawdown, it was Bitcoin separating itself from the pack. Bitcoin dominance soared to 61% due to relative resilience. That’s the highest dominance level seen since early 2021. More typically a sign of strength that typically spreads out into a raging alt season, this time Bitcoin dominance might be signaling a separation from the rest of crypto markets in the eyes of investors.

4. Warren Hates Polymarket

It was only a matter of time before the anti-crypto army came for Polymarket. In a letter to the CFTC, Elizabeth Warren claimed that the political betting markets “cheapen the sanctity of our democratic process.” She argued that they allow billionaires to bet for their favored candidate before showering them in donations, transforming the political process into a financial transaction. The CFTC currently has a proposed rule in motion to ban political event contracts. 

3. Trading Platforms Down

A huge wave of outages impacted stock trading platforms at yesterday’s open including Charles Schwab, Fidelity and TD Ameritrade. Markets were open, but retail traders couldn’t buy the dip. After market close, Robinhood announced their overnight trading partner had suspended trading until Wednesday to deal with extreme price swings. If only there were better rails to operate a stock market. 

2. DeFi Didn’t Break

DeFi platforms saw over $1B in liquidations but nothing broke. During the last cycle, big crashes would typically see assets depegging, markets dislocating and bad debts piling up. Occasionally a lending platform would blow up entirely. Nothing of the sort happened during this crash, with liquidations operating smoothly albiet painfully for leveraged traders. On-chain finance seems to have reached maturity, but cascading liquidations clearly weighed on Ethereum’s price. 

1. US Crash Overhyped

Monday’s trading session was terrible, but it was a long way from the 1987-style hellstorm many were expecting. A nasty crash at the open moderated into the afternoon. The S&P 500 closed down 3% on the day with the Nasdaq falling by 3.4%. Bitcoin gained 12% after markets opened in New York to ease liquidity pressure. Most surprisingly, Japanese markets retraced most of Monday’s losses, closing up 10%. Is the worst part of the crash over or just getting started?