Market nightmare! Yesterday's drop was not due to technical factors, but rather the bearish macroeconomic news.

Between 11 pm and 2 am yesterday evening, there was a significant downturn in the cryptocurrency market, with Bitcoin dropping by 3% and Ethereum by over 5%. Virtually all cryptocurrencies in the market were affected, leading to a total market capitalization loss of $13 billion at one point. This decline was not due to technical factors but may be attributed to the impact of macroeconomic conditions.

Cryptocurrency Market Plunges Alongside US Stocks

Some analysts believe that the recent drop is related to Bitcoin approaching a key resistance level, but in fact, last night's decline has a more direct correlation with the traditional financial markets.

As shown in the chart below, there is a clear correlation between the drop in Bitcoin and the S&P 500. The Dow Jones plummeted 950 points at one point during the trading session, ending the day down 650 points. The S&P 500 fell by 1.9%, and the Nasdaq closed 1.6% lower.

Looking at the recent global political and economic situation, there are two main reasons for the sharp decline in global investment markets: "Rising COVID-19 cases in Europe and the US" and "Political uncertainty in the US."

Rising COVID-19 Cases in Europe and the US

According to reports, while the COVID-19 situation in Asia has been gradually improving, cases in Europe and the US continue to rise. The US has set new records for daily new cases for two consecutive days, with total COVID-19 cases exceeding 8.7 million. Additionally, Italy reported a new high in daily confirmed cases, France has surpassed 50,000 new cases, and Spain has declared a state of emergency, with global confirmed cases exceeding 43 million. As the weather turns colder in North America and Europe, the Director-General of the World Health Organization (WHO) warned that the infection rate may continue to rise, and some countries in the Northern Hemisphere are facing a "dangerous moment."

Political Uncertainty in the US

The US presidential election has entered a heated stage, and it is a factor of uncertainty for the global economy. With the ongoing struggle between the Democratic and Republican parties, it is unlikely that a stimulus package will be agreed upon before the election. White House Chief of Staff Mark Meadows and Speaker of the House Nancy Pelosi have even accused each other of changing negotiation terms. Some traditional financial analysts believe that the financial markets may remain subdued until after the election.