Cryptocurrencies plummeted attributable to a world sell-off triggered by recession fears.
The price of Bitcoin was last seen trading 8% lower on Monday at $53,996.70, in response to Coin Metrics. At one point it fell to $49,111.10, its lowest level since February 13. Just seven days earlier, on July 20, it rose to as high as $69,982.
“Drops of 30 percent, as scary as they may be, are normal in bull markets and it is encouraging that Bitcoin has risen back above $50,000,” said Antoni Trenchev, co-founder of Nexo. “But make no mistake, we are in a choppy, volatile market environment… the moment to turn bullish will come when Bitcoin re-reaches its 200-day moving average at $61,500, which usually tells us whether we are in a bull or bear market.”
ether fell 11.44% to $2,432.22, recovering earlier losses that had worn out annual gains.
Crypto stocks declined with Bitcoin. Coinbase recorded a decline of seven%, while MicroStrategy fell by 9%, reducing previous losses by greater than half.
The moves follow a broader wave of selling that began last week when a weaker-than-expected July jobs report revived investors' recession fears. The tech-heavy Nasdaq Composite entered a correction phase. Japanese stocks entered a bear market on Monday after plunging greater than 12 percent overnight, the worst one-day sell-off since 1987.
The Bitcoin price has fallen by greater than 15% since Saturday.
“Until last Wednesday, everyone thought inflation was gradually falling and the economy was relatively strong, so with a successful soft landing of the economy, the Fed would start cutting interest rates,” said Yuya Hasegawa, crypto market analyst at Japanese bitcoin exchange Bitbank. “However, the US purchasing managers' index and the labor market report for July were much weaker than the market expected – and now [investors] are concerned about the possibility of a recession and are dumping risky assets.”
“However, the market response was a bit overdone as there isn’t any clear evidence yet that the economy is in recession,” he continued. “We will likely see some pullback this week.”
In addition to economic and geopolitical concerns, crypto investors are grappling with selling pressure from Mt. Gox's distributions and the declining chances of a second Donald Trump presidency in the U.S. Polls on Polymarket, an Ethereum-based prediction market platform, show that the gap between Trump and Vice President Kamala Harris has narrowed significantly since President Joe Biden dropped out of the race on July 21.
Bitcoin has already fallen about 17.5% in August, a typically sluggish month for risk assets, and is below the $55,000 floor that has supported it for most of the year. If it fails to recover, this could be its worst month since June 2022, when it lost about 37%.
Bitcoin is still holding on to its 27 percent gain since the beginning of the year, but the current turmoil in crypto prices has investors questioning the coin's validity as a hedge against uncertainty.
“The story that Bitcoin is a hedge is misleading,” Hasegawa said. “While it really works as a hedge against fiat currencies, it continues to be a dangerous asset. In the long term, I imagine it is healthier to carry Bitcoin than any fiat currency, but investors are likely to sell assets with high volatility first when risks arise.”
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