Bitcoin fell below 49,000, Ethereum recorded its largest drop in three years, and the global financial market is in turmoil

Source: Coin World

Author: Web3 Scent Observation

The cryptocurrency market is experiencing the "815" crash mode. On August 5 at 14:30, the price of Bitcoin (BTC) once again hit a new low, briefly falling below $49,000, with a 24-hour decline of 18.5%. Ethereum (ETH) experienced its most severe single-day drop since May 2021, plummeting 22.5% during the day, currently quoted at $2,278, with ETH prices having returned to the level at the beginning of the year, erasing all gains made this year.

In addition, according to market data from Coin World, the top 100 cryptocurrencies, excluding stablecoins, have all seen declines, with the highest drop for a single coin exceeding 29%, and an overall decline of more than 19%. Meanwhile, the total market capitalization of cryptocurrencies has fallen below $1.9 trillion, evaporating 17% within 24 hours.

(Screenshot from Coin World)

Black Monday, a global asset liquidation. The Tokyo Stock Exchange index plummeted 12.2%, marking the largest single-day drop since the 1987 crash, and the global capital markets are expected to witness a Black Monday. Market data shows that U.S. stock index futures have sharply declined, with Nasdaq futures down 5%, S&P 500 futures down 2.6%, and Dow futures down 1.22%.

Main Reasons for the Cryptocurrency Market Sell-off

The sell-off in the cryptocurrency market has been triggered by several factors:

Weak employment data: The U.S. employment data released fell short of expectations, increasing concerns about an economic recession.

Slow growth of major tech stocks: Several large companies, including Microsoft and Intel, reported second-quarter earnings below expectations, and market leader Nvidia was also hit hard due to anticipated interest rate cuts coming in September.

Sell-off by Jump Crypto: According to data from Arkham Intelligence, Jump Crypto has sold off hundreds of millions of dollars in assets from its books over the past few days, further exacerbating the sell-off pressure in the market.

Middle East tensions: The U.S. informed the G7 that Iran may attack Israel within 24 hours, triggering panic in the market.

The severe sell-off of Bitcoin and the entire cryptocurrency market has been triggered by a broader decline in financial markets. Concerns about a global economic recession and escalating tensions in the Middle East have led investors into a panic, resulting in massive capital outflows.

Additionally, the Crypto Fear and Greed Index has fallen back to a "fear" state, showing a score of 26 at the time of writing, indicating very pessimistic market sentiment.

Is the Bull Still Here?

The cryptocurrency market is set to face another tough week, with most of the losses needing to be compensated through increased spot and derivatives trading activities by traditional financial institutions.

On August 5, Galaxy CEO Mike Novogratz posted on X platform that Japan's interest rate hike has triggered global risk aversion. This suggests that the market may continue to be volatile in the short term.

10x Research analyst Markus Thielen predicted this crash on August 3. He pointed out that the U.S. economy has performed weaker than the Federal Reserve expected in the past 48 hours, and the weak ISM index has impacted risk assets. The Fed's hint at rate cuts in the fall may not prevent economic decline. If the stock market follows the downward trend of the ISM manufacturing index and even begins to anticipate a recession, stocks could see significant declines in the coming quarters. In this scenario, Bitcoin could face substantial sell-offs, with prices potentially dropping below $50,000 or even lower.

Mizuho Securities senior analyst Dan Dolev stated that Bitcoin is not yet the safe-haven asset people hope for. If unemployment rises and people lose their jobs, investors will have to liquidate their tokens. This also means that Bitcoin may face the risk of further declines.

In the past week, the crypto market has experienced the largest sell-off in nearly a year. Bitcoin fell from $70,000 to $49,000, Ethereum dropped from $3,300 to $2,100, and the total market capitalization of the cryptocurrency market decreased by nearly $500 billion. Although the short-term market outlook is uncertain, the crypto market is still expected to benefit from future monetary easing policies in the long term.

In the long run, as the Federal Reserve begins to cut interest rates, the U.S. is set to embark on a new round of monetary easing. As more dollars enter the capital market, the crypto market will also rise. Even if the U.S. economy does enter a recession, the government's ultimate choice may only be further monetary easing. Therefore, the long-term outlook for the crypto market remains optimistic.

Investors should closely monitor market dynamics and macroeconomic indicators to make rational investment decisions. At the same time, they also need to be prepared to cope with further market volatility and uncertainty.