A big drop in cryptocurrencies: Bitcoin and Ether lose value due to global stock market sell-off
5 August 2024 12:28
Cryptocurrencies suffered significant losses amid global economic instability on Monday, causing Bitcoin to fall by more than 16% and the second most popular token, Ether, to suffer its worst drop since 2021. This was reported by "Komersant Ukrainian" reports with reference to Bloomberg.
In the morning in London, Bitcoin traded 11% lower, reaching $52,680, adding to last week’s 13.1% drop, the worst since the collapse of the FTX exchange. Ether lost more than a fifth of its value before partially recovering to $2,342. Most major cryptocurrencies also suffered losses.
These falls come amid an intensifying global stock market sell-off, reflecting concerns about the economic outlook and questions about whether large investments in artificial intelligence will live up to expectations. Rising geopolitical tensions in the Middle East are also contributing to investor nervousness.
US exchange-traded funds for Bitcoin have experienced the largest outflows over the past three months. It remains to be seen whether these products will attract buyers when they resume trading or suffer even more outflows.
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Digital assets have been hit in part by the closure of the curry trade with the yen as speculators adjust to higher interest rates in Japan, said Hayden Hughes, head of crypto investments at family office Evergreen Growth.
“These investors are also grappling with a significant increase in hedging costs caused by volatility in the dollar-yen trading pair.”
– hughes said.
Bitcoin has suffered from a number of factors since hitting a record high of $73,798 in March. These include political instability in the United States, where pro-crypto Republican Donald Trump is running for president and Vice President Kamala Harris, who has yet to make up her mind on digital assets.
The uncertainty in the market is also related to the possible sale of Bitcoin confiscated by governments and the risk of an oversupply of tokens returned to creditors through bankruptcy proceedings.
Bond traders have stepped up bets on US interest rate cuts starting in September to support economic growth. The prospect of a less restrictive monetary policy is “good news for cryptocurrencies,” said Sean Farrell, head of digital asset strategy at Fundstrat Global Advisors LLC.
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Bitcoin’s sharp drop left the token at levels last seen in February. Ether, meanwhile, had earlier fallen to levels seen at the beginning of the year. As with Bitcoin, it remains to be seen how investors will react to this situation.
Justin D’Anetan, head of business development for Asia Pacific at market maker Keyrock, noted that the crypto market has partly followed Ether, in part due to rumours on social media about institutional sales of assets related to this token.
Coinglass data shows that about $900 million in long crypto positions were liquidated in the last 24 hours, indicating a failure of leverage.
Hushbu Hular, a partner at Lightning Ventures, a venture capital firm that invests in Bitcoin-related companies, said the broad decline in stocks has caused a certain “panic”, prompting investors to seek liquidity to settle margin calls. She believes that the cryptocurrency retreat is a “great buying opportunity”.
Bitcoin’s year-to-date growth has fallen to around 21%, compared to an 18% rise in gold and an 8% rise in the global equity index.
