Bitcoin Trading Volume Soars to ATH Amidst Market Crash

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Bitcoin trading volume has reached an all-time high for the first time since the fourth halving cycle. However, the broader crypto market experienced a significant downturn over the past weekend. Bitcoin’s price fell by over 10%, while Ethereum dropped by over 20%. 

As a result, some investors sell their BTCs to avoid further losses, while others buy at discounted rates, thereby spiking the trading volume. 

Bitcoin BTC’s Trading Frenzy

On August 6, Bitcoin exchanges saw trading volumes exceed $1.14 billion. Blockchain.com says this marks a significant increase from the post-halving average of $30 million daily.

However, the total volume may be higher because the Blockchain’s data only covers major exchanges and some OTC markets. This spike in volume indicates heightened market activity as investors either sell to cut losses or buy the dip. 

Bitcoin transactions dominated the network on August 5. According to Dune Analytics, over 90% of transactions came through BTC. Meanwhile, protocols like Ordinals and BRC-20 accounted for less than 9% of network activity.

Factors Behind the Market Crash

Trading firm Jump Trading reportedly contributed to the market downturn. Their alleged mass selling triggered a quick reaction in crypto markets.

Also, the Japanese yen carry trade played a role. This strategy, which used to be profitable, started losing money, increasing market pressure. The Kobeissi Letter, a trading resource, highlighted the uniqueness of this situation.

Stock markets around the world are crashing right now, but why?

The answer to this question is the Yen carry trade, a term you'll probably hear many times this week.

So what exactly is the Yen carry trade and why did it cause a market downturn?

A thread to explain:

(1/7) pic.twitter.com/0G5MnsV49I

— The Kobeissi Letter (@KobeissiLetter) August 5, 2024

They stated that this downturn differs significantly from previous market declines. According to Kobeissi post, the VIX volatility index hit extreme levels.

BREAKING: The volatility index, $VIX, is now trading above 65, a level only seen 2 previous times in history.

The only 2 times the $VIX has traded above 65 were the 2020 Pandemic and 2008 Financial Crisis.

This puts the $VIX up a whopping 550% from its July 2024 lows.

As a… pic.twitter.com/qH6oVJDXzz

— The Kobeissi Letter (@KobeissiLetter) August 5, 2024

These levels have only been seen twice before: during the 2008 financial crisis and the 2020 COVID-19 crash. Charles Edwards, founder of Capriole Investments, noted similarities to early 2020.

Some eerie similaraties to early 2020. Stocks overvalued, growing risk of recession, rising unemployment, sharp correlated global market moves down. At some point, the Fed will step in, likely with early rate cuts and probably liquidity too. But when? Until then, expect ALL…

— Charles Edwards (@caprioleio) August 5, 2024

He pointed out overvalued stocks, recession risks, and rising unemployment as the factors behind the market crash. Edwards warned that all markets might correlate until the Federal Reserve intervenes. He expects the Fed to eventually cut rates and provide liquidity.

However, the timing of such intervention remains uncertain. Until then, Charles urges investors to prepare for continued market volatility across all sectors.

This analysis suggests that the current crypto market crash is part of a broader economic trend. It’s not isolated to digital assets but reflects broader financial concerns.

Opportunistic Hackers Capitalize on Market Crash to Utilize Stolen Funds

This sudden crash created opportunities for some unexpected players. Some cryptocurrency hackers used the dip to purchase Ether at a discount.

According to Lookonchain, these hackers used funds stolen from previous hacks to make these purchases.

One notable example is the Nomad bridge exploiter. According to the report, this hacker used 39.75 million stolen DAI tokens in August 2022. 

With these funds, they bought 16,892 ETH during the recent price drop. Additionally, PeckShield, another investigation firm, noted further movements by the hacker. 

The Nomad exploiter sent 17.75 ETH to an intermediary address. By August 5, the hacker had moved approximately 2,400 ETH to Tornado Cash, worth around $7 million at the time.