Why Are the Nikkei and Crypto Market Suddenly Soaring? What’s Going On?

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Market Madness! Japanese stocks skyrocketed by over 11% after a dramatic 12% drop on Monday. The Nikkei 225 surged in a major rebound, reflecting the volatile state of global markets.

Japanese Stock Market Rebounds

The Nikkei 225 stock index jumped by 10.23%, or 3,217 points, marking its biggest one-day rally in points. This came after a steep 12% slump the previous day, triggered by the Bank of Japan’s second rate hike in 17 years, which strengthened the yen against the dollar, making Japanese stocks and exports more expensive for foreign investors.

Due to concerns about a US economic slowdown, stocks in the US, UK, and Europe also dipped on Monday. Not just equities but even crypto assets were affected by globalization, which shows market instability.

Bitcoin’s Recovery

Bitcoin has managed to reclaim the $56,000 level amid this turbulence. The leading cryptocurrency surged to an intraday high of $56,277 earlier this Thursday, according to Bitstamp data. This recovery mirrors the global stock market rebound, particularly Japan’s Nikkei 225. The US futures market has recovered, giving investors hope.

After plunging to a low of $49,557, Bitcoin has surged by more than 13%, recouping a substantial portion of its losses. For the first time in two years, the Crypto Fear and Greed Index entered the “Extreme Fear” zone, and U.S. spot Bitcoin exchange-traded funds lost $168.4 million. Moreover, the Bitcoin and cryptocurrency market sentiment index slipped to 17 out of 100 on August 5, the lowest since July 12. 

Investor Sentiment and ETF Inflows

Long-term investors saw the crypto meltdown as a buy-the-dip, according to on-chain data. For instance, the US spot Ether ETF registered a net cash inflow of about $49 million.

“We had net inflows into both our Bitcoin and Ethereum ETFs today. ETF investors are buying the dip,” said Bitwise CIO Matt Hougan in an X post, chimed into the swift market recovery. 

Despite this, Sean McNulty of Arbelos Markets noted that overall sentiment remains cautious.

Fed’s Next Move

Macroeconomic uncertainty persists, with significant speculation around the Federal Reserve’s next move. While a 25 basis-point rate cut in September seems almost certain, Fed watchers are debating the possibility of a 50 basis-point cut. The upcoming labor market data will likely influence the Fed’s decision, with potential implications for both traditional and crypto markets.