Financial markets were hit by a sell-off on Thursday, with cryptocurrencies and U.S. stocks falling sharply.
The latest weekly jobless claims in the United States increased more than expected, indicating that the labor market continued to cool. Data from the U.S. Department of Labor showed that the number of first-time unemployment claims was 249,000 in the week ending July 27, up from 235,000 in the previous week, the highest level since August 2023.
In addition, the U.S. manufacturing industry shrank at its largest rate in eight months, with the ISM manufacturing PMI at 46.8 in July, down from 48.5 in June and the lowest level since November 2023.
Weaker-than-expected economic data, coupled with the sell-off of chip stocks such as Nvidia, offset the market optimism after Powell hinted at a rate cut in September yesterday. As of the close of the day, the S&P, Dow Jones and Nasdaq all closed down, down 1.37%, 1.21% and 2.30% respectively. The 10-year U.S. Treasury yield fell 12 basis points to 3.98%, the first time the 10-year Treasury yield has fallen below 4% since February. The U.S. dollar index rose 0.38% to 104.351 points.
According to Bitpush data, Bitcoin (BTC) lost support near $64,500 near midday and quickly fell to a low of $62,227, with an intraday drop of 4.17%. Since then, bulls have bought on dips. As of press time, Bitcoin is trading at $64,720, down 0.25% in 24 hours.
Altcoin suffered heavy losses, with only 12 of the top 200 altcoins by market cap seeing positive returns.
Convex Finance (CVX) had the largest gain, up 9.3%, Curve DAO Token (CRV) rose 6.7%, and Helium (HNT) rose 5.7%. Mog Coin (MOG) had the largest loss, down 19.7%, followed by cat in a dogs world (MEW) down 16.3%, and io.net (IO) down 15.13%.
The current overall market value of cryptocurrencies is $2.27 trillion, and Bitcoin’s market share is 55.2%.
Prior to Thursday’s drop, analysts at Kraken noticed a bullish divergence on Bitcoin’s chart, suggesting it could soon challenge its all-time highs.
Kraken analysts said: "BTC seems to be on track to test the previous all-time high (ATH) of $73,666. Although it briefly fell below the 200-day exponential moving average (EMA) and the low of $56,378 in early July, there was no follow-up movement. BTC successfully reclaimed the 200-day MA, forming a bullish divergence on the relative strength index (RSI). Since then, BTC has reclaimed the 21-day and 50-day MAs, indicating a clear bullish trend."
Whether this analysis holds true in the long term remains to be seen, as Thursday’s sell-off caused Bitcoin price to fall back below both the 50-day and 200-day EMAs (as shown in the chart above).
Risk aversion rises
According to Yahoo Finance, investors are concerned that the U.S. economy is heading into a recession , especially as unemployment claims rose to an 11-month high and manufacturing construction spending fell for two consecutive months.
Investors increased their bets on U.S. Treasuries, sending the five-year yield to its lowest level in six months. In part, rising tensions in the Middle East led traders to seek safer assets, such as gold , which rose to $2,450, just 1.5% below its all-time high.
Despite sell-off, outlook remains positive
Despite Thursday’s sell-off, industry analysts agree that the outlook for the cryptocurrency market is improving amid calls for Bitcoin to be designated a strategic reserve asset similar to gold.
John Haar, Managing Director of Swan Bitcoin, said: “Both gold and Bitcoin are monetary assets with limited supply. As such, they tend to react similarly to broader macroeconomic events and trends. With gold’s current total market capitalization estimated at around $13 trillion and Bitcoin’s current market capitalization of around $1.3 trillion (roughly 10% of gold’s), Bitcoin can act as a store of value similar to gold, with the added benefit that it is well suited for payments (also known as a medium of exchange).”
Haar said: "We believe that gold is likely to gradually appreciate in the coming years as we continue to experience an environment where fiat currencies lose value/purchasing power over time and foreign entities want to move away from their reliance on the U.S. dollar as much as possible. We believe that Bitcoin has greater price appreciation potential than gold in the coming years. We expect the market capitalization of gold and Bitcoin to be equal over the next 5-10 years."
Haar noted that in the short term “there may be some factors that affect the price of gold or bitcoin that cause them to behave differently.”
He concluded: “If you believe in increasing currency debasement, inflation, debt accumulation, financial censorship, or capital controls, then Bitcoin is the number one asset you should own.”
Taras Kulyk, co-founder and CEO of Synteq Digital, believes that the Federal Reserve's maintenance of current interest rates may be the reason why Bitcoin has failed to break through the 70,000 mark. In the coming months, as more and more financial institutions around the world begin to adopt Bitcoin as a financial reserve asset, we should be able to see additional appreciation in the price of Bitcoin. "
As adoption increases, he said, “Bitcoin’s correlation with gold could return to its historical average. However, because people view Bitcoin more as a digital foundation than a commodity, fixed-price, non-fixed asset, Bitcoin’s correlation with gold may not actually return to historical levels.”
Taras Kulyk said: "Ongoing political tensions around the world will certainly increase the value of both over time, however, as more investors begin to realize Bitcoin's true hard currency digital currency and wealth preservation status, we should see larger institutions join in and increase their exposure to Bitcoin on their balance sheets."
Author: BitpushNews Mary Liu
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