Blood in the Streets: Wall Street’s ‘Fear Index’ Surpasses Historical Level Amid $5 Trillion Sell-Off

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As a seasoned crypto investor with a decade of market experience under my belt, I must admit that the current state of the equities and cryptocurrency markets is reminiscent of the turbulent times we faced during the 2008 Financial Crisis and the 2020 COVID-19 pandemic. The VIX hitting levels above 65, a sight only seen twice since its inception, is a stark reminder that even the most resilient markets can be shaken by unexpected events.

As a researcher, I’ve noticed an intriguing development with the Chicago Board Options Exchange Volatility Index (VIX). This real-time index, which reflects market predictions about short-term volatility, has reached a level that has occurred scarcely on two previous occasions since its inception.

Based on recent reports from Kobeissi Letter on social media platform X (previously Twitter), the Volatility Index (VIX) has surpassed 65, a level it reached only during the 2008 Financial Crisis and the 2020 COVID-19 market drop.

According to the source, the VIX has surged to an impressive 550% above its lowest point in July 2024, following a significant loss of more than $5 trillion in the S&P 500’s market value over the last month.

As someone who has witnessed both the 2008 Financial Crisis and the 2020 Pandemic, I can attest that when the volatility index ($VIX) climbs above 65, it signals turbulent market conditions. This level was only reached twice in history during those two crises, and now we’re seeing it again. It’s a stark reminder of the power the markets have to disrupt our lives.

— The Kobeissi Letter (@KobeissiLetter) August 5, 2024

The steep decline in the stock market occurred due to a mix of several reasons, primarily investor worries about the pace of economic expansion and the possibility that artificial intelligence might be excessively priced.

The latest unemployment figures in the United States have surpassed expectations, leading to the activation of a well-known economic indicator called the Sahm rule. This rule compares the three-month moving average of the U.S. unemployment rate with its lowest point over the past year. This comparison suggests that there might be indications of an approaching recession in the country.

As tension escalates in the Middle East, investors are becoming increasingly worried due to anticipation that Iran may soon retaliate against Israel following the assassination of Hamas’s leader Ismail Haniyeh in Tehran, fueling this concern.

During a significant sell-off, various equity markets experienced steep declines. Japan’s Nikkei 225 index, for instance, recorded its most severe two-day drop in history, losing almost a fifth of its value within that timeframe. In the same vein, the S&P 500, a key indicator of the stock market, fell over 3% during the past day, and the technology-focused Nasdaq dipped by 3.3%.

The sell-off has been so intense that several brokerages briefly went down.

USER REPORTS INDICATE PROBLEMS AT VANGUARD – DOWNTECTOR

— *Walter Bloomberg (@DeItaone) August 5, 2024

The recent crash had a ripple effect on the cryptocurrency market as well; Bitcoin‘s value plummeted from approximately $70,000 in the past week to currently trade at around $54,000. Prior to its recovery, it dipped below the $50,000 mark.

As a researcher observing the dynamic crypto market, I note that Ethereum‘s Ether has experienced a significant dip, approximately 30%, over the recent period, now trading at roughly $2,400. This downward trend has resulted in a substantial loss of around $300 billion within the last day. However, it’s worth mentioning that during this downturn, the overall market loss escalated to over $700 billion before showing signs of recovery.

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2024-08-05 19:21