Bitcoin and Ether Drop Dramatically, Echoing 2021’s Crypto Market Collapse

Bitcoin, Ether

and other cryptoassets faced a sharp downturn on Monday over widespread risk aversion in global markets.

As of 6:35 UTC, Bitcoin traded 12.6% lower at $50,827. This move downward continued a decline from the previous week when it fell 13.1%—its largest drop since the FTX exchange collapse in 2022. At the same time, Ether dropped 17% to $2,221, bringing its total loss to more than 30% over the past week — its steepest fall since 2021. The entire crypto market is down nearly 12% in the last 24 hours.

Investors are increasingly concerned about the possibility of a US recession, exacerbated by growing geopolitical tensions in the Middle East. This combination of economic uncertainty and global instability is driving a risk-off sentiment among investors.

Weak Job Growth and Rising Unemployment Spook Investors

The unexpectedly low job growth in July coupled with an unexpectedly high unemployment rate indicated a marked 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, said crypto derivatives platform Flipster’s CEO Yongjin Kim.

Kim noted that market sentiment has shifted due to the diminishing impact of the Trump rally and increasing election odds for Harris. Additionally, the movement of $ETH to a centralized exchange by Jump Trading, amid speculations of exiting the crypto business following a CFTC investigation, has unnerved investors. In response to these developments, investors are looking for greater clarity regarding Jump Trading’s situation, election forecasts, and potential buying opportunities at current market levels, Kim added.

BREAKING: OVER $800M LIQUIDATED IN THE PAST 24 HOURS pic.twitter.com/lVqqgHAC2M

— DEGEN NEWS (@DegenerateNews) August 5, 2024

Digital wallet infrastructure provider Cobo CEO and co-founder Discus Fish linked the global market downturn to several key events. He cited Bank of Japan’s surprise interest rate hike to its highest in 16 years as a primary factor.

Additionally, he pointed to the US, where disappointing corporate earnings, weaker-than-expected job data, rising unemployment, and uncertainty about a September rate cut by the US Fed—despite market expectations—have all contributed to market instability.

Investors Pull Out $237M from Bitcoin ETFs, Marking Largest Outflow in Months

Bitcoin exchange-traded funds (ETFs) experienced their most significant outflow in three months on Aug. 2. This large-scale withdrawal fueled speculation about the potential for a new bear market. Investors are now closely watching to see if these ETFs will attract new buyers at lower prices or if the selling pressure will continue to intensify.

Large-scale withdrawals from Bitcoin ETFs are typically indicative of a broader market sell-off, which can further depress Bitcoin’s price. The recent $237m outflow represents 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 Under Pressure from Potential Surplus Supplies and Government Sales

The crypto market is also grappling with potential government Bitcoin sales and the possibility of a surplus supply from tokens returned to creditors in bankruptcy cases.

Moreover, the recent liquidation of $830.8m worth of bullish crypto derivatives positions within a 24-hour period, as indicated by Coinglass data, suggests that leveraged bets are unraveling.