Once again witnessing history, the cryptocurrency market faces multiple bearish shocks, with over 1 billion dollars brutally wiped out

Author: Nancy, PANews

Four years ago, the global "circuit breaker wave" is still fresh in memory. Today, the stock market plunge triggered a circuit breaker, marking a historical moment once again. Coupled with multiple factors such as the slowdown of the U.S. economy and rising geopolitical risks, the global stock market's downward trend has intensified, and market panic is spreading rapidly. Cryptocurrencies are also experiencing a "Black Monday," with Bitcoin leading the flash crash and the market facing a widespread decline.

Over $1 billion in long positions liquidated, with whales and market makers "withdrawing"

According to Binance market data, in the past 24 hours, the price of Bitcoin briefly plummeted to about $51,417, with a daily maximum drop of nearly 15.2%; Ethereum fell to a low of $2,111, with a daily maximum drop of over 21.7%, effectively erasing this year's gains. Most other cryptocurrencies also experienced double-digit declines. CoinGecko data shows that as of the time of writing, the total market capitalization of cryptocurrencies has fallen below the $2 trillion mark, dropping to $1.9 trillion, erasing over $270 billion in a single day, with a 24-hour decline of up to 15.3%.

As a result, Coinglass data shows that in the past 24 hours, over 269,000 people were liquidated across the network, with a liquidation amount reaching $1.02 billion, mainly concentrated in Bitcoin, Ethereum, and Solana, of which nearly 90% came from long position liquidations, amounting to $892 million, while short position liquidations were $133 million. Meanwhile, the crypto market is in a state of "fear." According to the latest data from Alternative, today's Fear and Greed Index (FGI) has dropped to 26 points, with market greed continuing to decline.

In the midst of the sharp decline, the on-chain lending liquidation volume also hit a new high. According to the on-chain analysis platform Parsec, in the past 24 hours, the liquidation volume on DeFi exceeded $320 million, setting a new high for the year. Among them, the liquidation volume of ETH collateral reached $187 million, wstETH reached $77.9 million, and wBTC reached $32.5 million. Additionally, with the surge in liquidation amounts, the Ethereum browser Etherscan shows that as of the time of writing, the Gas fees on the Ethereum network soared from single digits to 985 Gwei. According to DefiLlama data, if Ethereum drops 20% from the current price to $1,841, there will be at least about $187 million in on-chain liquidation amounts.

Among them, many leveraged whales have been liquidated. For example, according to on-chain analyst Yu Jin's monitoring, this morning's sharp drop in ETH led to the liquidation of some leveraged ETH whales on-chain, further pushing the ETH price down by over 20%. Four whales were liquidated for a total of 14,653 ETH this morning, worth about $33.54 million. PeckShield monitoring also showed that an address starting with 0x6f3b was liquidated for 1,111 WETH (worth $3.14 million) and 45,290 LINK (worth $493,000), while an address starting with 0x47ab was liquidated for about $5.28 million in WBTC and over $156,000 in cETH, and the address 0x790c was liquidated for 20,500 AAVE (about $2 million), among others.

During this significant drop in the crypto market, many whales and market makers have also shown significant reduction in positions. For instance, according to on-chain analyst Yu Jin's monitoring, Jump Trading recently redeemed $410 million in wstETH in batches and transferred it to CEX (centralized exchanges). BitMEX co-founder recently posted that a certain "big player" has collapsed and sold all crypto assets, referring to Jump Trading, which Lookonchain has monitored to have sold $377 million worth of wstETH since July 24. Meanwhile, The Data Nerd's monitoring shows that Wintermute also deposited over $100 million in UNI, ETH, WBTC, and USDT into Binance on August 4; data from @ai_9684xtpa indicates that a whale that locked up PENDLE for the past six months, 0xfC0, also seemingly cut losses of nearly 40% on August 4; Lookonchain data monitoring shows that a certain Smart Money also deposited 2,500 ETH into Binance yesterday.

However, some whales and hackers have chosen to buy the dip. For example, according to Lookonchain monitoring, after the market crash, a whale address that previously made a profit of $76 million on ETH bought back 6,000 ETH (worth about $13.9 million); the Nomad attacker hacker address spent 39.75 million DAI to buy 16,892 ETH and deposited the ETH into Tornado.Cash.

Multiple negative events as the "behind-the-scenes" culprits of the sharp decline

Government and compensation selling pressure, macroeconomic downturn, geopolitical risks, and the declining probability of Trump's election are considered the "behind-the-scenes" culprits of this significant drop in the crypto market.

Unexpected surge in supply brings downward pressure

QCP Capital pointed out that the market has experienced a significant correction, and this drop is mainly due to an unexpected surge in Bitcoin supply, caused by several key events, including the U.S. government releasing about 28,000 Bitcoins, the distribution of nearly 34,000 Bitcoins in the Mt. Gox settlement agreement, and the distribution of $1.5 billion worth of Bitcoin and ETH to Genesis creditors.

At the same time, the institution also noted that the recent increase in Bitcoin mining difficulty has risen by 10.5% to a historical high, putting additional pressure on miners and forcing them to liquidate their holdings.

Deteriorating macroeconomic indicators, U.S. stocks collectively decline, and Japanese stocks trigger circuit breakers

Continuing last week's turbulent trend, U.S. stock futures fell collectively, with the S&P 500 futures down 1.84%, the Nasdaq down 2.38%, and the Dow Jones Industrial Average down 1.51%. Notably, Berkshire Hathaway, owned by Buffett, significantly reduced its Apple holdings by 50% in the second quarter, which the market views as an important signal that U.S. stocks have peaked.

The decline in U.S. stocks stems from the collapse of confidence in the U.S. economy, mainly due to recent economic data. It is reported that the U.S. unemployment rate in July recorded 4.3%, the highest since October 2021, triggering the Sam Rule, which indicates a recession. Although the market generally believes that the Federal Reserve will cut interest rates for the first time in September, it is criticized as being "too late," and Barclays, the second-largest bank in the UK, also pointed out that the Fed is unlikely to cut rates by 50 basis points in September.

"Macroeconomic indicators have fueled bearish sentiment," QCP Capital pointed out in its report. The higher-than-expected unemployment rate of 4.3% and concerns about an impending economic recession have intensified investor worries. The key indicator measuring market volatility, the Chicago Board Options Exchange Volatility Index (VIX), soared above 28, reaching its highest level since the regional banking crisis in March 2023, further exacerbating market anxiety.

In addition to the Federal Reserve, the Bank of Japan's interest rate decision is also noteworthy. Amid a global trend of interest rate cuts, the Bank of Japan announced a 15 basis point rate hike last week, raising the policy rate to 0.15%-0.25%, exceeding the market's expected 10 basis points. Historically, rate hikes by the Bank of Japan are often seen as an important signal predicting a global economic recession. Following the news of rate hikes and a reduction in government bond purchases, the yen soared against the dollar to the 144 yen range, the highest in seven months, and the reversal of the yen's trend has also reduced the attractiveness of arbitrage trades. As a result, the Japanese stock market also plummeted, with the Nikkei 225 index and the Topix index continuing to decline after the Asian stock market opened on Monday, triggering circuit breakers.

Geopolitical tensions escalate

The situation in the Middle East is affecting global nerves, with the military confrontation between Israel and Iran intensifying, especially after the recent assassination of Hamas leader Ismail Haniyeh by Israel, which has "added fuel to the fire." According to the latest news, Iran may attack Israel within 24 hours. The escalating geopolitical tensions are putting pressure on the stock market. The intensifying geopolitical tensions are driving up risk aversion and impacting global financial markets, particularly as the stock market gradually falls from its highs.

Declining likelihood of Trump being elected U.S. president

Since Republican presidential candidate Trump incorporated cryptocurrency into his "America First" agenda, including promises to establish a "national Bitcoin reserve," proposing to use Bitcoin or "crypto checks" to pay off $35 trillion in national debt, and appointing a presidential advisory committee on Bitcoin and cryptocurrencies, he has received strong support from the crypto market. However, with Biden announcing his withdrawal from the re-election campaign and supporting the nomination of Harris, predictions about Trump's campaign probability have begun to decline, while Harris has seen an increase.

According to Global Market Broadcast, Trump raised $138.7 million in July, less than the amount Harris raised in her first week of campaigning, currently holding a total of $327 million in cash. Previously, Harris's campaign team announced that they had raised a record $200 million in just seven days, with two-thirds coming from first-time donors. Recently, over 200 venture capitalists have voiced support for Harris, including billionaire Mark Cuban, Reid Hoffman, and Kleiner Perkins co-founder Brook Byers, SV Angel's Ron Conway, and Cowboy Ventures' Aileen Lee, among other industry leaders.

According to the latest Reuters/Ipsos poll, Harris has a slight lead over Republican presidential candidate Trump by 1 percentage point. Meanwhile, according to decentralized prediction market Polymarket data, as of August 5, Harris's probability of being the "winner of the 2024 presidential election" has risen to 43%, while Trump's has dropped to 53%. In this regard, Ruslan Lienkha from the online exchange YouHodler analyzed that the increase in Harris's election probability may be bearish for Bitcoin, and participants in the crypto market will continue to face pressure from the U.S. SEC.

However, Harris is also extending an "olive branch" to the crypto industry. Insiders revealed that Harris may share her stance on Bitcoin in the coming weeks, as she will participate in a virtual roundtable discussion on digital asset policy with crypto industry executives this week. Additionally, Harris's campaign team has contacted key figures in the crypto industry, such as Coinbase and Circle, stating that their engagement with the crypto industry is not for donations, but to pave the way for a reasonable regulatory framework.

Short-term market still faces uncertainty

After experiencing a waterfall decline, how will the crypto market unfold in the future?

"Historically, market activity in August tends to be sluggish, and it is usually a month where the cryptocurrency market is adversely affected by seasonal factors." Recently, Coinbase pointed out in a report that over the past five years, Bitcoin's average decline in August has been 2.8%, and the reduction in liquidity and trading volume may lead to increased volatility in August, and we may see similarly sluggish market performance this year.

Michael van de Poppe, founder of MN Trading, pointed out that Ethereum is holding a key support area, and if it cannot maintain this level, it may have about a 4% impact on the price and push Bitcoin further down into an uncertain trading range.

Andrew Kang, co-founder and partner of crypto venture capital firm Mechanism Capital, stated on social media that he will no longer bet on ETH further declining, but the market may still drop further, and it is best to focus on finding future buying opportunities.

"Assuming the stock market follows the downward trend of the ISM index and even begins to anticipate an impending economic recession, in this case, the stock market may experience a significant decline over the next few quarters, which would also have a major negative impact on Bitcoin. If this happens, Bitcoin's price may return to the $50,000 level, or even drop further," noted Markus Thielen, an analyst at crypto research firm 10x Research.

However, Matrixport also stated in its latest analysis report that despite the recent weakening momentum of Bitcoin, it is expected to perform well in the fourth quarter. From a technical perspective, Bitcoin's price volatility range is narrowing, indicating that it is about to break out of the consolidation phase, with the potential for a breakthrough in the coming weeks. As the CPI gradually declines over the next 12 months, it will create a favorable environment for assets like Bitcoin. The outlook for Bitcoin's fourth-quarter performance is optimistic, with expectations of breakthrough progress.

Bitwise CEO Hunter Horsley recently made a bold bullish statement on Bitcoin on social media, stating, "The crypto ETF's model portfolio allocation is still in its early stages but is growing, which is the ultimate goal. 2024 is the beginning of Bitcoin's mainstream era." Noted cryptocurrency analyst Willy Woo even predicted that if based on a 3% portfolio allocation, Bitcoin's ultimate price could exceed $700,000.