Bitcoin slumps 10% to trade at $54,333, heaviest weekly loss since FTX collapse, crypto market sell-off at $760 million

Bitcoin tumbled over 10 per cent at one point, before bouncing to trade at $54,333 at 9.17 am in Singapore on August 5, Bloomberg reported. The digital currency in fact had its worst week since the FTX collapse shook crypto markets in 2022, losing 13.1 per cent over the past seven days, it added.

Later in the day, near 7 am in London, Bitcoin was trading lower at $53,100; and Ether shed over a fifth of its value before paring some of the slide to change hands at $2,360, as per a Bloomberg update. Most major coins, including meme-token Dogecoin, were deeply in the red.

The world's largest cryptocurrency is under pressure due to risk aversion in global markets, and even smaller tokens such as Ether and meme-themed Dogecoin sank under “heavy losses”, the report said. Early in the day, Ether slid to its weakest since mid-January and was last down 16 per cent at $2,300, Reuters reported.

Crypto Sell-off

As much as $760 million of bullish crypto positions using derivatives were liquidated in the past 24 hours, Coinglass data showed, a sign of leveraged bets coming unstuck, Bloomberg reported. 

Himanshu Maradiya, Founder and Chairman, CIFDAQ said that the selloff in cryptocurrency markets, including Bitcoin, can be attributed to a confluence of economic factors and one of the major repayments.

“This one significant repayment of approximately $8 billion worth of BTC related to the Mt. Gox bankruptcy, caused investor anxiety about increased market supply. Weak US labour data and subsequent recession fears have prompted expectations of deeper rate cuts by the Federal Reserve, causing investors to shift their assets towards safer options. This movement has not only affected high-yielding currencies and equities but also significantly impacted the crypto market,” Maradiya said.

He added that as markets react to these economic signals, Bitcoin and other cryptocurrencies are experiencing heightened volatility. 

Concerns Over Economic Outlook, AI

According to Bloomberg, growing concerns around the global economic outlook and questions of a possible bubble created by heavy investments into artificial intelligence (AI), have pushed global stock selloffs and impacted the crypto side as well.

Further, markets have displayed “skittishness” given the tense geopolitical situation in the Middle East, and while they await the United States Federal Reserve's (Fed) upcoming policy meet outcome.

Bond traders have amplified bets on US interest-rate cuts beginning in September to support economic expansion. The volatility in stock markets has “increased the likelihood of less restrictive monetary policy coming sooner rather than later — a good thing for crypto,” Sean Farrell, head of digital-asset strategy at Fundstrat Global Advisors LLC told Bloomberg.

Bitcoin's Position

In the US, Bitcoin exchange-traded funds (ETFs) saw their largest outflows in around three months on August 2. Its moving average price also slumped, with Tony Sycamore, market analyst at IG Australia Pty, noting that the technical chart pattern “opens the way for a deeper pullback” toward $54,000.

The token hit a record $73,798 high in March 2024, but has since been pulled back by various factors including uncertainty ahead of the US presidential elections race in November. Notably, Republican candidate Donald Trump has positioned himself as “pro-crypto”, while opponent and Democratic nominee Kamala Harris has yet to outline her policy stance on digital assets, Bloomberg report said.

The cryptocurrency is off nearly 20% from its March 2024 high, as per the Reuters report.

Also hanging over the market are possible sales of Bitcoin seized by governments and the risk of a supply overhang from tokens returned to creditors through bankruptcy proceedings.

Bitcoin is still a lucrative investment. Its year-to-date (YTD) advance has moderated to around 25 per cent, compared with gold's 18 per cent ascent and a 9 per cent climb in global stocks, the Bloomberg report added.

“We anticipate that the current correction phase will pave the way for more stable growth as the macroeconomic landscape stabilises. Our analysis suggests that despite short-term fluctuations, the underlying fundamentals of Bitcoin and the broader crypto ecosystem remain strong, positioning them for resilience and long-term potential,” Maradiya added.

(With inputs from Bloomberg and Reuters)