On Monday, Bitcoin, Ether, and other cryptocurrencies experienced a significant downturn due to widespread risk aversion in global markets.
As of 6:35 UTC, Bitcoin had dropped 12.6%, trading at $50,827. This decline extended a trend from the previous week when Bitcoin fell 13.1%, marking its largest drop since the collapse of the FTX exchange in 2022. At the same time, Ether saw an even steeper drop of 17%, falling to $2,221 and bringing its total loss for the week to over 30%—its sharpest decline since 2021. Overall, the crypto market is down nearly 12% in the last 24 hours.
What’s driving this sharp decline? Investors are increasingly concerned about the potential for a US recession, heightened by rising geopolitical tensions in the Middle East. This combination of economic uncertainty and global instability is fostering a risk-off sentiment among investors.
Weak Job Growth and Rising Unemployment Fuel Fears
Recent economic data is adding to the anxiety. July’s job growth was unexpectedly weak, and the unemployment rate rose higher than anticipated, signaling a slowdown in the labor market. This has heightened recession fears, leading to a 2.43% drop in the Nasdaq and a 1.84% drop in the S&P 500, according to Yongjin Kim, CEO of crypto derivatives platform Flipster.
Kim pointed out that market sentiment has shifted due to the diminishing impact of the Trump rally and increasing election odds for Harris. Additionally, the movement of Ether to a centralized exchange by Jump Trading, amid rumors of the firm exiting the crypto business following a CFTC investigation, has further unnerved investors. As a result, investors are seeking greater clarity regarding Jump Trading’s situation, election forecasts, and potential buying opportunities at current market levels.
Bitcoin ETFs See Largest Outflow in Months
Adding to the bearish sentiment, Bitcoin exchange-traded funds (ETFs) saw their largest outflow in three months on August 2. This massive withdrawal of $237 million has fueled speculation about a potential new bear market. Investors are now watching closely to see if these ETFs will attract new buyers at lower prices or if the selling pressure will continue to increase.
Large-scale withdrawals from Bitcoin ETFs typically indicate a broader market sell-off, which can further depress Bitcoin’s price. The recent outflow is the largest single-day withdrawal in three months and the fourth largest since the ETF’s launch in January. This significant outflux highlights the current bearish sentiment among investors.
Crypto Market Faces Additional Pressure
The crypto market is also contending with potential government Bitcoin sales and the possibility of a surplus supply from tokens returned to creditors in bankruptcy cases.
Moreover, recent data from Coinglass shows that $830.8 million worth of bullish crypto derivatives positions were liquidated within a 24-hour period, indicating that leveraged bets are unraveling.
How will the crypto market navigate these turbulent times? Are you holding on to your investments or looking for buying opportunities? Share your thoughts and strategies in the comments below.
