Photo: Michaël van de Poppe
Over the past few weeks, it felt like the ground was pulled out from under us. Markets tumbled, altcoins sometimes lost tens of percent in a matter of days, and even Bitcoin took a heavy hit. Yet, I’m convinced this crash has nothing to do with crypto itself. This isn’t a ‘Bitcoin is dead’ story, but a classic macroeconomic shock that is simply playing out in the crypto markets as well.
This Isn’t a Crypto Crisis, It’s a Macroeconomic Shock #
I felt how heavy October and November were, especially for altcoins. Many projects are down more than 60% in two months. As a fund, we obviously look broader and our losses are around 10%, but that doesn’t take away the stress. On social media, I mostly see doom scenarios: ‘bear market,’ ‘altcoins are dead,’ ’this was it.’ But I’ve seen just as often that a major crash actually forms the bottom, after which markets slowly but surely start to climb back up. And the higher they climb, the faster that recovery often goes.
The Japanese Interest Rate and the ‘Carry Trade’ as the Hidden Cause #
So what is actually going on? The key lies largely in Japan. For years, the country had virtually no interest rates. Investors borrowed cheap yen and invested that money in US stocks, bonds, or even crypto: the famous ‘yen carry trade.’ Now that Japanese interest rates are rising, that strategy suddenly becomes less attractive.
Those who borrowed at nearly 0% and are now facing rates towards 1% or higher see their profit margins shrink and their risk increase. The result: positions are being closed, and you see selling pressure across the market.
However, the impact of this is now smaller than many think. In the beginning, every rate hike was a huge percentage jump. Now, it’s about marginal steps. What I think we’re mainly seeing is the market pricing in bad news ahead of time. Everyone expects another rate hike, and so people sell before the decision. The result: the crash comes earlier, not later.
Why This Crash Could Actually Be a Bullish Signal #
There’s another factor at play. The sharp drop around $79,000 didn’t feel ’natural.’ It seemed more like a large entity was dumping, similar to previous crises like FTX or COVID. Such moments feel terrible, but they often mark capitulation: the point where almost everyone gives up.
And that’s precisely when you need to pay attention. Because while crypto is falling, we’re seeing signs that the US central bank will soon ease its grip. Unemployment is rising, the economy is slowing, and that means interest rate cuts and extra liquidity are getting closer. Historically, that has heralded a bull market more than a bear market.
My conclusion? This doesn’t feel like the end, but like a painful reset. If Bitcoin manages to stay above important levels and breaks back towards $90,000, this could very well be the start of the next leg up. As contradictory as it sounds: it is precisely now, in this fear, that the opportunities lie.
Disclaimer: This article is intended for informational purposes only and does not constitute financial advice. Investing in crypto or other financial products involves risks. Always make your own considerations and consult a financial advisor before making investment decisions.