On Monday, crypto currencies were heavily impacted by investors’ risk aversion in global markets. Bitcoin fell more than 10% at one point, while Ether, the second-largest digital currency, suffered its steepest drop since 2021.
At 10:40 a.m. Singapore time, Bitcoin was trading at $54,100, down 8.5%. It has fallen 13.1% over the past week, the worst, while Ethereum lost more than a fifth of its value to $2,275 before paring some losses.
The declines came amid a worsening global stock market selloff, raising concerns about the economic outlook and questions about how much investment in artificial intelligence is responding to expectations surrounding the technology. Geopolitical tensions in the Middle East have also escalated, adding to investor concerns. Additionally, Bitcoin funds on the US exchange saw their largest outflows in three months on Aug. 2. These developments raise questions about whether cryptocurrency financial products are ready to attract investors when they experience significant declines, or if they will suffer further capital flight.
Digital assets have been affected in part by investors avoiding the yen carry trade, prompting speculators to reassess their strategies after Japan’s interest rate hike, according to Hayden Hughes, head of crypto investments at Evergreen Growth.
Hughes noted that investors face high hedging costs as a result of the volatility of the US dollar versus the Japanese yen. In addition, Bitcoin has been hit by a series of blows since hitting a record high of $73,798 in March, including volatility in the US political arena, where Republican candidate Donald Trump, a pro-crypto, is competing with his Democratic running mate Kamala Harris, who has yet to decide on her position on digital assets, in the presidential race.
Fed Expects Rate Cuts
There are also concerns about the sale of Bitcoin holdings seized by US governments, and the growing possibility of an oversupply as a result of the sale of cryptocurrencies returned to creditors in bankruptcies.
The Fed’s expectations of a rate cut have sparked an increase in bets on bonds by traders, with the aim of supporting the US economic expansion, starting in September. In this context, Sean Farrell, head of digital asset strategy at FundStart Global Advisors, pointed out that the possibility of less tight monetary policy is positive for cryptocurrencies.
These developments have negatively affected the Bitcoin market, as it fell to its lowest level since February, while Ethereum witnessed a decline to levels not seen since the beginning of this year. Questions remain about how investors in new US cryptocurrency exchange-traded funds will react to these latest developments.
Commenting on the matter, Justin D’Anithan, head of business development for Asia Pacific at Keyrock, said that the cryptocurrency decline was partly due to the decline in Ethereum, after rumors emerged on social media about institutional selling of Ethereum-related assets.
Coinglass data showed that about $700 million in bullish cryptocurrency positions were liquidated using derivatives in the past 24 hours, an indication that leveraged bets are failing. Analysts said the broad-based decline in stocks had sparked some panic, prompting investors to seek liquidity to settle margin calls. The decline in cryptocurrencies, she explained, represents a “good buying opportunity.” Bitcoin’s rise since the beginning of the year has slowed to about 24%, compared to a 19% rise in gold and a 9% rise in the global stock index.
Asset prices in the cryptocurrency market
As cryptocurrency asset prices continue to slide, Bitcoin has fallen below $60,000. Blockchain data shows that it has liquidated hundreds of millions of dollars worth of crypto assets. The company has received around $300 million since August 3, mostly from addresses identified as exchange wallets. In contrast, around $80 million has been moved from the company’s merchant wallets during the same period, mostly to exchanges such as Coinbase, Gate.io, and Binance.
This movement is still ongoing. The data suggests that a large portion of the transferred funds were in form of Ethereum. According to a Twitter user named EmberCN, Jump Crypto has taken over $500 million worth of wstETH positions on Lido since July 25. Currently, companies hold around $130 million worth of ETH, while around $200 million worth of Ethereum has been transferred to exchanges. Today, crypto markets are seeing sharp declines, with Bitcoin (BTC) falling below $60,000, down 12.6% from yesterday and 24.0% over the past week. In contrast, Ethereum (ETH) is trading at $2,349.90, down 18.7% from yesterday and 30.4% over the past seven days.
The total cryptocurrency market cap currently stands at $1.88 trillion, down -16.57% over the past 24 hours, having lost its $2.4 trillion ceiling. The market dominance is largely concentrated with Bitcoin, which makes up 54.32% of the total cryptocurrency market cap.
Regarding the news, gold enthusiast Peter Schiff opined that central banks are playing with fire due to their low-interest rate policies, which have led to a global debt bubble. He stressed that with the rise in inflation, these policies began to show their negative consequences, which prompted him to call for a radical reform of the global financial system. broad sell-off in the cryptocurrency market increased, with the total liquidation in the past 24 hours reaching $ 1.06 billion
