While the sharp decline in Asian markets caused great anxiety in global markets, the market started the week with a bloodbath.
While the unprecedented sharp decline in Asian markets increased the selling pressure in risky assets, Bitcoin and altcoins also received their share.
While Bitcoin fell below $50,000, the declines in altcoins reached 30 percent.
While investors are experiencing great anxiety due to the decline in Bitcoin, they continue to investigate the reason for this sharp decline. The main reason for the decline is considered to be the sharp decline in the Japanese stock market, which exceeded 13 percent and has not been seen since 1987.
Adam Khoo, who trades in global markets, stated that the bloodbath in Bitcoin and the markets is related to the Japanese Yen and USD parity, and that this short-term crisis has created a new opportunity for investors, and said the following about the decline:
“The sharp rise in the JPY/USD pair caused a massive unwinding of Japanese Yen trading positions. This triggered a sharp decline in US stocks. For those who don't understand how this works, here's a quick explanation:
1) Many traders were borrowing Japanese Yen (JPY) at low interest rates, converting them to USD, and using it to buy US stocks.
2) With the Bank of Japan (BOJ) increasing interest rates, JPY strengthened significantly against the USD.
Now these traders are in trouble. Not only do they pay higher interest on the JPY they borrow, they also face huge foreign exchange losses. The USD assets these traders hold may not be enough to repay the JPY they borrowed.
3) This situation causes a huge relaxation in trading positions. Faced with huge losses and margin calls, traders sell US stocks to increase their USD holdings, convert them back into JPY, and repay their loans.
4) This could lead to more selling pressure on US stocks and further declines in the short term. The escalation of the war in the Middle East and political uncertainty in the United States also increase fear and panic.
As an investor, this is great news because these types of short-term crises and panics give me the opportunity to buy high-quality US stocks at increasingly larger discounts. Take advantage of temporary mispricing caused by short-term crises. That's how we get richer.”
*This is not investment advice.
