The Dow Jones closed down 1,175 points on Monday on the back of a 666 point drop the preceding Friday, resulting in the worst week for the index in two years. This was the largest single point drop in the history of the blue-chip index, sending the markets into negative territory for the year.

The previous largest point drop for the Dow was 778 points in September 2008, during the height of the financial crisis.

The drop was quickly mirrored around the globe, spreading through the global markets and markedly changing the sentiment that had led the stock market to set new records almost daily.

The Vix, commonly referred to as the fear index judging market volatility, jumped more than 300 percent in the wake of the declines in the stock market, as investors participated in the global sell-off. The sharp falls confirmed the markets were in correction, ending the week almost 9 percent lower than the all-time high set just two weeks prior.

Investors have been quick to try to find an explanation of the sudden price declines ending a nine year long bull run. Fingers are now being pointed at algorithms, an overdue market correction, and uncertainties regarding future interest rate hikes from the Fed. Many fear that an increased economic activity and higher inflation rates may force the Fed to increase interest rates at a higher than expected, leading to higher funding costs

No sector of the market was spared, with companies falling into the red, despite earnings surprising the street and beating analyst estimates. But no industry was hit harder than the energy sector, falling an average of 14 percent since the highs only two weeks ago.

The oil price has seen a slow and steady increase in the years following the oil price crash in late 2014, when oil prices fell from 115 dollars to just below 30 dollars a barrel. Prices reached 60 dollars a barrel for the first time in three years just last November and was touching 70 dollars ever so briefly last week, in a move that seems not to last.

Despite being portrayed as a dramatic event by almost every media source, the decline in the stock market is not as dramatic as one may think. Following an unrelenting bull market, many analysts have pointed to stretched valuations and unsustainable increases for months. It has also been pointed out that a market correction, broad price declines of 10 to 20 percent over a short span of time, has been long overdue. Many were, however, taken aback by the timing of it all, happening in the midst of an earnings season with broadly positive numbers being reported from most sectors of the economy.  

The volatility of the stock market was not as noticeable in the crypto currency space, having started a major sell-off weeks before. Bitcoin may have been a well-known product before 2017, usually popping up in the headlines once it broke a new price record or in relation with Bitcoin exchanges being hacked. But it is a safe bet that nobody would have predicted the historic rise both in terms of valuation and the sheer number of currencies emerging over the last year.

While the stock market saw an impressive gain of 25 percent, nothing could compare to the meteoric 3,500 percent increase of the crypto market, with some currencies outperforming even that over the same time period.

With over 1,500 different crypto currencies and a total market capitalization of over 800 billion dollars at the beginning of this year, the growth in the crypto currency market was likened to the Tulip Mania and universally panned by both regulators and investors. But the unprecedented rise could not last, and since the beginning of the year, the market has lost a total of 400 billion dollars, shedding half its value and leaving investors uncertain of its future.

Cryptocurrencies thus outnumbered the 180 circulating currencies used around the globe today by a factor of 8, with some of them even touting the ridiculousness of the market openly.

This is most famously illustrated by Dogecoin, based on an internet meme of a Shiba Inu dog. This digital currency released in late 2013 quickly gathered an online following, openly stating its purpose as a “barometer for crypto mania and speculation”.

Dogecoin’s market value is down from 2 billion dollars just a month ago and is today valued at 550 million dollars, more than four times the St. Anselm College endowment.