The crypto market cap has dropped by 12.87%, losing over $300 billion in value. This decline follows Japan's Nikkei index extending its losses by more than 20% since July. The sell-off in the crypto market intensified during Asian trading hours, exacerbated by the Nikkei's additional 7% drop early Monday, August 5.
Massive Liquidations
Data from Coinglass reveals that over $800 million has been liquidated from the crypto market in the past 24 hours. Most of these liquidations occurred in the last four hours, with $700 million in long liquidations and $106 million in short liquidations. Bitcoin (BTC) has plummeted more than 10%, falling below $54,500, while Ethereum (ETH) and other altcoins have seen corrections of 15-20%.
Worst Sell-Off Since FTX Collapse
Bitcoin is experiencing its worst sell-off since the FTX collapse in 2022, as investors shift towards risk aversion. On August 2, Bitcoin exchange-traded funds (ETFs) registered their largest outflows in three months. With Bitcoin's price falling below its 200-day moving average, bears currently dominate the market.
Rising US Recession Fears
The weak jobs report has amplified recession fears, with the probability of a hard landing increasing significantly. Economist Peter Schiff argues,
"Rate cuts will fail to revive the economy or employment, but they’ll heat up already hot inflation. This isn’t your father’s stagflation. It’s much worse!"
Schiff also criticized the poor performance of Spot Ethereum ETFs, predicting ETH could drop back to $2,000. Currently, ETH is barely holding above $2,300.
Disappointing Jobs Report
The latest U.S. nonfarm payrolls report revealed only 114,000 jobs were added in July, far below expectations. The unemployment rate unexpectedly rose to 4.3%, its fourth consecutive increase. According to BlackRock’s Jeffrey Rosenberg,
"We’ve had a string of disappointing data, and that’s pushing more concerns about the economic outlook."
This weaker-than-expected jobs data has stoked fears of a slowdown, impacting risk assets, including cryptocurrencies.
Bitcoin Long Liquidations Surge
The cryptocurrency market has seen a surge in long liquidations over the past 24 hours. Approximately $241.07 million worth of long positions were liquidated, accounting for 90% of total market liquidations. This large-scale unwinding has intensified the downward pressure on crypto prices. Bitcoin's price drop from $65,000 to $54,000 reflects this significant liquidation impact.
Stock Market Decline
The broader stock market decline has further weighed on the crypto market. On August 2, stocks fell sharply as the weaker-than-expected jobs report ignited worries of an economic downturn. The broad market index dropped 1.84%, the Nasdaq Composite lost 2.43%, and the Dow Jones Industrial Average fell 1.51%. This stock market decline has potentially spilled over into the crypto market.
ETF Outflows
Both Bitcoin and Ethereum ETFs have faced significant outflows, contributing to the market’s woes. Bitcoin ETFs saw $237.4 million in outflows on August 2, with a weekly total of $80.4 million. Ethereum ETFs experienced outflows totaling $54.3 million for the day and $169.4 million for the week. Grayscale’s ETHE saw $61.4 million in outflows on Friday. These negative ETF flows, coupled with Genesis Trading’s bankruptcy repayments in BTC and ETH, may have exacerbated the crypto market crash.
The crypto market is facing a significant downturn due to Trump losing ground to Kamala Harris in polls, the ongoing Israel/Gaza conflict after the Hamas leader's death, global economic concerns, massive liquidations, ETF outflows, and heightened fears of a US recession. Investors are becoming more risk-averse.
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