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    Crash in Financial Markets: Possibilities

    Let's explore why this fall in the stock and crypto markets happened and what to do.

    Liquidation

    Let's look at some numbers. In the crypto market, $1 billion was liquidated within a single day, which is a staggering amount.

    If we look at the US stock market, it's even crazier, with more than $1 trillion wiped out. This is somewhat expected due to the large capitalization of the US stock market.

    And that's just the US stock market. The Nikkei also posted a record low today with a performance of -11%!

    In general, every stock market in the world opened with a red candle. But why?

    The reasons
    The main and most important reason is the unexpected increase in the interest rate by the Bank of Japan from 0.10% to 0.25%, which was not expected by the market.

    This had a significant impact on investors participating in carry trades. To explain briefly: This is a strategy where investors borrow money in a currency with low interest rates and invest in assets in a currency with higher interest rates (usually bonds and the stock market). Japan is one of the few developed countries that maintains a policy of low interest rates, making the yen key in this carry trade strategy: Borrowing yen: Investors borrow Japanese yen (JPY) because they can get loans cheaply because of low interest rates.Investing Elsewhere: Investors then convert the borrowed yen into another currency , such as the United States dollar (USD), where they can invest in assets (such as bonds) that offer higher interest rates.Profit on the difference: The profit comes from the difference between the low interest rate paid on the borrowed yen and the higher return, received from the investments in the other currency.Risk: The main risk is the fluctuation of the currency. If the yen strengthens significantly against the other currency, converting back to yen may result in losses. As explained, the risk of yen strengthening is materializing right now, especially due to the decision of the Bank of Japan and the fact that loans taken out in yen , are paid out. This prompted people who had used yen loans to buy stocks in other countries to sell their positions to repay their loans.

    Tensions in the Middle East
    Another contributing factor is the tension between Israel, Lebanon and Iran. The Iranian regime is expected to strike Israel in retaliation for the assassination of Hamas leader Ismail Haniyeh on Iranian soil.

    Conclusion
    Uncertainty is back in the market, which is why investors are wary of risky assets like crypto or stocks. There is a lot of FUD (Fear, Uncertainty, and Doubt) circulating and I believe that in times like these, profit opportunities can arise! But, of course, with careful management of your investments. Good luck!

    Quick update: Asian stock market and crypto market are recovering, is this the end of autumn? We'll have to wait and see

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