Friday marked a turbulent day for the market, largely influenced by Lisa Cook, who triggered fierce sell-offs. Recently reinstated to her position at the Federal Reserve following a court ruling after an attempt by Trump to dismiss her, Cook reignited talks on the potential tech bubble and the “artificial intelligence collapse,” resulting in significant losses for cryptocurrencies. Her remarks were seen as a dramatic response to past political tensions and sparked volatility in the market.
Lisa Cook and the Friday Decline
The labor market data revealed a four-year high unemployment rate, and Nvidia’s earnings report had earlier fueled risk appetite. However, during the U.S. market opening, Cook implied that markets were overly inflated and the AI bubble might burst, possibly taking steps to retaliate against former political opponents. As a result, key indices suffered; Dow Jones fell nearly 500 points, the S&P 500 sank to 6,617, and Nasdaq dropped to 22,432. The market’s 2%+ loss since the prior day conceals the enormous scale of economic impact, equating to hundreds of billions for trillion-dollar corporates.
Major names such as Amazon and Microsoft saw declines of 4% and 3%, respectively, while Bitcoin faced over 10% in sales, revealing the domino effect of stock market fluctuations on crypto. According to CFRA’s Chief Investment Strategist, Sam Stovall, S&P 500 sales could extend to 9%. Nvidia, worth around 5 trillion dollars, experienced a 10% dip this month, sending ripples across tightly interlinked tech giants.
Will Crypto Decline Continue?
Bitcoin first lost its 112,000-dollar threshold, needing to reclaim it promptly. Subsequent tests of 107,000 and the critical 102,800-dollar level, crucial for a 1.5-year uptrend, unfolded. As these levels broke, the 98,000-dollar threshold seemed vulnerable, risking a breach of 92,000 and a weakened 88,000-dollar support. Each step was sequentially executed, culminating in a significant test near 80,000 dollars.
Since October, both whale and short-term investors have participated in sales, making post-dip rebounds fleeting against persistent selling pressure. A single whale offloaded 11,000 BTC since October, liquidating assets initially acquired in 2011.
Sales must exhaust before approaching the 74,000-dollar support base, as metrics show BTC suffering extreme overselling. Neither the FTX collapse nor LUNA’s downfall, nor even COVID mirrored this scenario. Despite BTC’s higher current ranges compared to past figures, the relative comparison to previous collapse figures offers perspective.
However, optimism persists. Unlike prior cycles, capital influx remains uninterrupted. Specialists suggest this cycle distinguishes itself as Bitcoin emerges as a new asset category, paralleling gold. The introduction of Bitcoin to larger liquidity pools foretells foundational shifts. Ki Young Ju shared the above graph, noting:
“While Bitcoin ETFs have grown as digital gold, capital structures indicate that the substantive qualitative leap is pending. Far larger liquidity pools await Bitcoin.”