Crypto Market Faces Heavy Sell-Off Amid Nvidia Subpoena, as Fed Rate Cuts Loom
The cryptocurrency market has come under significant selling pressure after the U.S. Department of Justice (DOJ) issued a subpoena to Nvidia, wiping out over $1 trillion from U.S. markets. All eyes are now on potential Federal Reserve rate cuts, which investors hope could restore liquidity. However, some analysts warn that such a move may offer only temporary relief, given the underlying fragility of the U.S. economy and the growing risk of a recession.
Fed Rate Cuts: A Short-Term Fix for a Long-Term Problem?
With just two weeks until the Fed begins its rate-cut cycle, market analysts are scrutinizing historical data to gauge the potential outcomes. Brett (@brett_eth), a prominent market commentator, has highlighted several parallels between the current economic climate and previous interest rate-cut periods, including those in 1981, 1990, 2000, and 2007.
Brett noted that rising unemployment and the ongoing inversion of the 10-year to 2-year yield curve echo patterns from previous economic downturns. Although there is optimism that rate cuts could provide a lift to the markets, history suggests a more concerning trend. According to Brett, markets typically experience a brief rally (around 25 days following rate cuts) but are often followed by an average 13-month downturn.
Despite the hope of a near-term boost, analysts remain cautious, with some expecting one last market surge before a deeper decline sets in. Meanwhile, the Bank of Japan’s hawkish stance and plans for continued rate hikes could exert additional pressure on the U.S. dollar and broader U.S. markets.
Could Nvidia Spark the Next Market Crash?
Shares of Nvidia plummeted 10% after the DOJ launched an antitrust investigation into the chipmaker. The probe centers on Nvidia’s dominance in the AI computing market, with regulators concerned that the company may be making it difficult for customers to switch to alternative suppliers. The investigation also suggests that Nvidia could be penalizing customers who don’t exclusively use its AI chips, effectively stifling competition.
This situation is drawing comparisons to the DOJ’s antitrust case against Microsoft in the lead-up to the dot-com bubble burst in 2000. As a result, some analysts believe that Nvidia’s subpoena could be the catalyst for the next U.S. recession, raising questions about whether the upcoming Fed rate cuts will be enough to avert such an outcome.
Adding fuel to the speculation, a former Business Insider reporter suggested that Microsoft may be Nvidia’s largest customer, accounting for nearly 19% of its sales. If true, this revelation could further complicate matters for regulators and investors alike.
Crypto Market Takes a Hit, Bitcoin Facing Potential 75% Correction
In the wake of the DOJ’s actions, the crypto market has seen a wave of liquidations, with Bitcoin in particular losing critical support levels. Some analysts are predicting a 75% correction in BTC’s price, raising concerns among investors.
Meanwhile, gold appears to be emerging as a potential safe haven. Economist Peter Schiff recently presented a chart showing a positive correlation between gold ETF holdings and the price of gold, suggesting a strong rally for the precious metal may be on the horizon.
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