Author: flowie , ChainCatcher
Editor: Marco, ChainCatcher
The sky is falling and the earth is breaking! August 5th may become the most terrifying Black Monday in history. Almost all markets, from global stock markets to cryptocurrency markets, have been hit hard and have all entered a major plunge mode.
In the past 24 hours, BTC has dropped to as low as $52,300. In one week, BTC has dropped by more than 25% from over $70,000 on July 29.
Currently, BTC is trading at around $54,600, with a 24-hour drop of more than 10%. ETH once dropped to $2,111, and is now trading at $2,316, with a 24-hour drop of more than 20%, which has basically wiped out all gains this year.
The total market value of cryptocurrencies also fell below $2 trillion, now at $1.91 trillion, a 24-hour drop of more than 11%. Coinglass data shows that in the past 24 hours, the total liquidation of the entire network reached $788 million, mainly in long orders, with long orders reaching $676 million.
Compared with the brief market panic caused by the German government's sell-off and the huge compensation for Mentougou, the risk aversion sentiment in the global market this time is more panic and helpless, and the expectations for the market correction in the future are more pessimistic.
According to the latest data from alternative, today's Fear and Greed Index (FGI) is in panic mode, falling from 34 points yesterday to 26 points.
BTC plunged more than 25% in 7 days. What are the factors?
Based on factors such as expectations of a rate cut in September, the price of BTC briefly exceeded $70,000 last week.
But in just a few days, the Bank of Japan's unexpected interest rate hike, weak US economic data, and tensions in the Middle East brought risk aversion in global markets to a peak.
On July 31, the Bank of Japan announced a 15 basis point interest rate hike, ending years of negative interest rates. When the yen begins to raise interest rates, it means that the cost of borrowing yen by capital and investors will increase, forcing them to first sell some U.S. stocks including high-risk assets such as Bitcoin to reduce yen debt.
Between August 1st and 2nd, the United States released a number of economic data in succession, triggering market concerns about a U.S. economic recession.
The ISM manufacturing data reflecting US factory activity in July was only 46.8%, lower than market expectations. The US unemployment rate rose to 4.3%, the highest level since 2021.
Coupled with the escalating geopolitical tensions and uncertainties in the Middle East, this has also triggered risk aversion among investors.
The US stock market has retreated sharply for several consecutive days. On August 1, local time, the Dow Jones Industrial Average fell more than 700 points during the day, the S&P 500 fell 1.37% throughout the day, the Nasdaq Composite Index fell 2.3%, and the Russell 2000 Index, which covers more small and medium-sized enterprises, fell more than 3%.
On August 2, the three major U.S. stock indexes continued to fall collectively. Among them, the Dow Jones Industrial Average plummeted by more than 2.4%, the S&P 500 index fell by more than 2.6% during the session, and the Nasdaq fell by more than 3.4%. Most of the seven major U.S. stock companies (including Apple, Microsoft, Google, Amazon, Nvidia, Meta and Tesla) fell. Among them, Amazon, Tesla, Microsoft and Google fell for four consecutive weeks.
The pullback of US stocks has further transmitted risk aversion in many aspects to the crypto field. On August 2, the US spot Bitcoin ETF suffered the largest capital outflow in about three months. Today, BTC fell below $53,000, with a 24-hour drop of more than 10%.
The sell-off and escape of some crypto institutions may also have caused a sharp drop in cryptocurrencies such as Bitcoin and Ethereum.
Arthur Hayes, co-founder of BitMEX, posted on social media that he learned through traditional financial sources that a "big guy" had collapsed and sold all his crypto assets. Currently, most of the community speculates that he is referring to Jump Crypto.
According to an analysis released by EmberCN yesterday, Jump Trading may be selling ETH and is currently redeeming a sum of $410 million worth of wstETH (120,000 tokens) in batches into ETH and then transferring it to trading platforms such as Binance/OKX.
As of yesterday, Jump Trading has redeemed 83,000 wstETH into 97,500 ETH in the 9 days since July 25. Of these, 66,000 ETH (about $191 million) have entered the trading platform.
The market outlook is full of uncertainty
The sharp drop in the crypto market this time is not just an internal adjustment of the crypto market, but is affected by the global financial environment and has greater uncertainty. This has also caused many investors to say that they dare not buy the dips at the bottom even with such a sharp drop.
On August 3, crypto research firm 10x Research said that the recent decline in Bitcoin prices may only be the beginning of a larger decline, and the weak ISM pointed out a shock to risky assets.
Assuming the stock market follows the downward trend of the ISM index and even begins to anticipate an imminent recession, in this case, the stock market could fall sharply in the coming quarters, which would also have a significant negative impact on Bitcoin. If this happens, the price of Bitcoin could return to the $50,000 level or even fall further.
Today, 10x Research continued to be bearish on Bitcoin and Ethereum. "We expect the $55,000 support line to fall, which could push the price down to $42,000. In this case, Ethereum could fall below $2,000."
Crypto macro analyst @Phyrex_Ni said that there are no positive factors in the short term that could trigger Bitcoin's pullback to $70,000.
After the huge compensation initiated by Mentougou and the German government's selling triggered market panic, Trump's speech soon supported the positive expectations of Bitcoin. However, this time, there is no clear positive news to support the callback.
@Phyrex_Ni also said that whether the crypto market will continue to be sluggish or will pull back to restart the bull market rhythm is highly likely to have nothing to do with crypto itself, but requires a global macro-financial recovery. Therefore, the market outlook faces greater uncertainty.
Although the market is generally pessimistic about this crash, for some crypto believers, the crypto market, which has experienced many black swans, is still moving forward.
Jeremy Allaire, co-founder and CEO of Circle, said, "As bullish (on the crypto industry) as six weeks ago, focus on technology, industry and adoption. In the face of global macro fluctuations, don't pay attention to the price of digital commodities unless you are just trading."
