Cryptocurrencies suffered a severe downturn on Monday (August 5) as a wave of risk aversion swept through global markets. The fall in Cryto market worldwide mirrored the global mayhem in stock markets. Japan’s Nikkei index has its worst day in decades. European stocks drop most in two years. Closer home, Bombay Stock Exchange closed 2000-plus points down.
Similar to the stock market rout, Bitcoin plummeted over 16% at one point, marking its steepest decline since the FTX collapse.Ethereum also experienced its most dramatic fall since 2021. The broader cryptocurrency market was hit hard, with most major coins posting substantial losses. Bitcoin’s value dropped by 11% to $52,680, following a 13.1% decline the previous week. Ethereum’s price plunged by over 20% before partially recovering to $2,342. About $900 million of bullish crypto positions were liquidated in the past 24 hours, Coinglass data showed, as per a report in Bloomberg.
The declines come as a global stock selloff intensifies, reflecting concerns about the economic outlook and questions over whether heavy investment into artificial intelligence will live up to the hype surrounding the technology. Geopolitical tension is rising in the Middle East, adding to investor anxiety.
Key factors that contributed to the Crypto crash:
* Global economic uncertainty: Concerns about a potential recession and the impact of heavy AI investments on the economy fueled a stock market selloff, which negatively affected cryptocurrencies.
* Geopolitical tensions: Rising tensions in the Middle East added to investor anxiety.
* Unwinding yen carry trade: As investors adjusted to higher interest rates in Japan, they reduced their exposure to riskier assets like cryptocurrencies.
* US political climate: The ongoing presidential race, with its implications for crypto regulation, created uncertainty in the market.
* Bitcoin supply concerns: Potential sales of seized Bitcoin and a supply overhang from bankruptcy proceedings weighed on prices.
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