Cryptocurrencies plunged sharply on Monday as global market risk aversion took hold, with Bitcoin falling by over 16% at one point and Ether experiencing its steepest drop since the FTX collapse in 2022.
By 4:51 p.m. in New York, Bitcoin had traded 9% lower at $53,883, adding to a 13.1% decline from the previous week—the most significant drop since the FTX exchange’s demise. Ether fell by more than 20% before recovering slightly to $2,419. Most major cryptocurrencies saw substantial losses.
Crypto-related equities were also hit hard. Coinbase Global Inc., the largest US exchange, saw a 7.3% decrease, while Bitcoin proxy MicroStrategy Inc. dropped nearly 10%. Miners Marathon Digital Holdings Inc. and Riot Platforms Inc. each recorded their sixth consecutive day of losses.
These declines occurred against the backdrop of a broader global stock selloff, driven by concerns about the economic outlook and skepticism regarding the promises of artificial intelligence investments. Rising geopolitical tensions in the Middle East further contributed to investor unease.
In the past 24 hours, total liquidations of crypto bets reached approximately $1.1 billion, marking one of the largest liquidation events since early March. According to Coinglass, these included $814 million in bullish positions and $263 million in short positions.
US Bitcoin exchange-traded funds (ETFs) experienced their largest outflows in about three months on August 2. The future of these products remains uncertain—whether they will attract buyers when trading resumes or face further withdrawals.
Data from CoinShares Ltd. shows that Bitcoin and Ether investment products saw outflows of $400 million and $146 million, respectively, for the week ending August 3.
The decline in digital assets is partially attributed to the unwinding of the yen carry trade, as speculators adjust to higher interest rates in Japan. Hayden Hughes, head of crypto investments at Evergreen Growth, noted that increased hedging costs related to USD-JPY volatility are also impacting the market.
Bitcoin, which reached a record high of $73,798 in March, has faced multiple headwinds including US political uncertainties and potential sales of government-seized Bitcoin or a supply glut from bankruptcy proceedings.
Bond traders have increased their bets on US interest rate cuts starting in September to bolster economic growth. Sean Farrell, head of digital-asset strategy at Fundstrat Global Advisors LLC, suggested that such a shift could be beneficial for crypto markets.
Bitcoin’s decline on Monday brought it to levels last seen in February, while Ether fell to prices not seen since early this year. The reaction of new US spot-Ether ETF investors remains uncertain.
Justin D’Anethan, head of Asia-Pacific business development at market maker Keyrock, noted that the crypto downturn seemed particularly pronounced for Ether, citing social media speculation about institutional selling.
Despite the current turmoil, Khushboo Khullar, a venture partner at Lightning Ventures, views the market retreat as a potential buying opportunity. Simon Peters, a crypto analyst at eToro, indicated that technical indicators and the Crypto Fear and Greed Index suggest that prices may be nearing a bottom, with the possibility of a rebound in the coming days.
Bitcoin’s year-to-date gain has moderated to approximately 29%, compared to a 17% increase in gold and an 8% rise in a global stock index.
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