Market #Collapse: What Happened on Monday?
The market crash was rather fragmented, with the most significant losses seen in the Japanese markets (-12.4%), Korea (-9.1%), Taiwan (-8.4%), and the cryptocurrency sector, where declines reached up to 16% at one point.
Was the crash in Japan unprecedented? Absolutely!
The three-day decline in the #Nikkei 225 amounted to 19.6%āthe worst result in the history of trading. This drop was even more severe than in March 2011 (Fukushima), where markets fell by 17.5%, and worse than the most intense declines in 2008, when the market fell by 18.5% on October 10, 2008, and nearly repeated on October 24-27, 2008 (17.4-17.8% drop over three days). It was also more significant than the October 1987 crash, which saw a 17.5% decline.
Over two days, #Japan plunged 17.5%āalso the worst result in history, as the 2008 crash was only 15%, and the 1987 drop was 16.9%.
For a single day, the market saw its second-worst result after October 1987, when it fell by 14.9%.
Given the trading volumes, open interest, and the influence of Japan's stock market on the financial system, this is undoubtedly the most significant stress in history.
The collapse is solely due to the concentration of margin positions and the foolishness that has gripped the markets since early 2024.
The Japanese market led the growth, and unlike in the U.S., where some justification can be found, Japanese companies are in dire straits, with the worst margins among all developed countries.
This also applies to the markets in Korea and #Taiwan, where the trigger for the collapse was overheated tech companies unsupported by real cash flows, leading to a collapse out of nowhere.
For #Korea, the collapse is significant but not a recordāthere were worse drops in 2008 (-9.5-10.5%) and eight times between 1995 and 2001. Given the current market capitalization and open interest, this is a record.
Itās important to understand the context, structure, and conditions. Markets dropped from all-time highs under the worst #liquidity balance in four years, with a slowing economy and AI-fueled hype from the U.S. market.
The #crypto market experienced one of the strongest hits in its history.
- From the previous day's close to the intraday low on August 5, the market fell 16% across the board, with many positions losing 20-30%. This was the worst day since November 8, 2022 (#FTX bankruptcy). In monetary terms, daily losses amounted to $320 billionāthe worst day since December 4, 2021, and the 6th worst day in trading history.
- Over seven days, the #market fell by 31%, or $751 billion. In percentage terms, this is the strongest seller pressure since June 2022 (35% drop), and in monetary terms, it is the second worst result in history after May 19-20, 2021.
- Market volumes increased 3.6 times in spot trading and almost 5 times in derivatives compared to the 30-day average, with #volatility rising 6-8 times!
- Given the open interest, trading volumes, concentration of margin calls, and overall context, August 5 is the worst day in crypto history, surpassing the record of May 19-20, 2021, due to the growth of the client base and open interest over three years.
- Except for #Bitcoin, #Ethereum, BNB, and Solana, the rest of the market fell back to October 2022 levelsāthe period of maximum depression. Market sentiment has turned extremely bearish after the intense bull run in March.
The #crash was total, the blow to the market too severe. Usually, after such a rout, a bull market does not emerge for 6-12 months, except for the factor of forced liquidity injection, as in 2021.
European and U.S. markets experienced their worst series since 2022 similar to what happened in June and March 2022. But they are far from records, as even in 2015-2016, the declines were more significant, so I wonāt focus too much on the minor scuffles.
Yes, #Europe wiped out almost all the accumulated gains for the year but remains in the positive territory, except for France. Given that they dropped from all-time highs, it was quite expected and obvious.
source:
Multipolar Market