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Bitcoin has plummeted to $50,000 in the past day, marking its lowest level since February 2024. The decline is part of a broader wave of risk aversion sweeping through global markets, likely triggered by the sharp rise in the anti-risk Japanese yen and turbulence in the U.S. bond market.
Bitcoin’s 18% drop in a day follows a period of significant optimism for the leading cryptocurrency. Last month, BTC soared to $70,000, just shy of its all-time high of $73,500, and maintained that level until the recent downturn.
Other major cryptocurrencies also suffered significant losses. Ethereum (ETH), Binance Coin (BNB), Cardano (ADA), and Solana (SOL) have all declined by around 15% over the past day.
The total crypto market capitalization has fallen below $2 trillion, landing at $1.85 trillion, down 13% in just 24 hours. Combined with losses from the previous week, Bitcoin has lost nearly a quarter of its value in seven days.
Downturn in Financial Markets
The recent crypto price crash coincides with a broader downturn in financial markets, fueled by fears of an impending global recession. Investors turned to safe-haven assets as global stock sell-offs deepened, following weaker-than-expected U.S. jobs data at the end of last week.
The disappointing jobs report has heightened investor concerns that the Federal Reserve may have erred by not changing interest rates last week, potentially steering the world’s largest economy towards a recession.
Additionally, volatility in major earnings reports and a more hawkish stance from the Bank of Japan have exacerbated the stock sell-off.
Speculation that the popular yen “carry trade” has collapsed in the short term has also contributed to market instability. A “carry trade” involves borrowing in a currency with low-interest rates, like the yen, and reinvesting in a currency with higher returns.
On Monday morning, the Swiss franc strengthened by 1.2% against the dollar, trading at 0.847 against the greenback, its strongest level since January this year, according to data compiled by CNBC.
U.S. Treasury yields continued to fall, hitting a one-year low. The yield on the 10-year Treasury was down by over eight basis points to 3.7099%, while the 2-year Treasury yield dropped to 3.7315% after falling by around 14 basis points. Japan’s 10-year government bond yield also dipped to 0.204%.
Stock Market Sees Massive Sell-Off
On Monday, the stock markets saw significant selling. U.S. stock futures fell sharply, with the Dow Jones Industrial Average futures declining by about 600 points, roughly 1.5%. S&P 500 futures and Nasdaq-100 futures dropped by 2.8% and 4.9%, respectively.
In Asia, Japan’s stocks confirmed a bear market overnight. The Nikkei index fell by 12.4%, closing at 31,458.42, marking its worst day since the “Black Monday” crash of 1987. The index’s loss of 4,451.28 points was the largest decline in terms of points in its history.
In Europe, the regional Stoxx 600 index dropped by 2.34%, with all sectors and major regional bourses trading in the red. Tech stocks shed as much as 5% before paring losses to trade down 2.8%. Mining stocks lost 3.65%, while banks were down by 3.22%.
Another Crypto Firm in Trouble?
While the recent crypto market crash is largely attributed to the broader market rout, there are also speculations about other potential reasons. Arthur Hayes, former CEO and co-founder of the once-largest derivatives trading platform in the cryptocurrency industry, has hinted at a significant player being forced to sell off large amounts of crypto.
“My TradFi birdies are telling me somebody big got smoked, and is dumping all #crypto. No idea if this is true, I won’t name names, but let the fam know if you are hearing the same?” Hayes tweeted.
My TradFi birdies are telling me somebody big got smoked, and is dumping all #crypto. No idea if this is true, I won't name names, but let the fam know if you are hearing the same?????
— Arthur Hayes (@CryptoHayes) August 5, 2024
Over the weekend, Jump Crypto, the crypto division of Jump Trading, transferred hundreds of millions of dollars worth of crypto to exchanges. This has sparked speculation that it might be preparing to sell off a substantial portion of its assets.
The transfers included over 120,000 staked Ether tokens worth around $314.8 million, starting on July 24, just a day after the launch of spot Ether exchange-traded funds in the United States.
Blockchain analytics platform Arkham reported that much of these funds were unstaked at the Ethereum redeem address before being moved to Binance, OKX, Coinbase, Bybit, and Gate.io deposit addresses.
Crypto sleuth EmberCN estimated that approximately $410 million of Ether had been unstaked, with $191 million already entering crypto exchanges. Jump Crypto still holds at least $125.8 million of staked Ether, including $116.1 million of wrapped Lido Staked Ether (STETH).
Jump Crypto also moved significant amounts of USD Coin, Tether, Ether, Uniswap, and Shiba Inu tokens to various crypto exchanges.
Jump Trading, the market maker used by Binance, Coinbase, Okx and Bybit are always selling crypto for their clients but appears they may have unstaked their own $ETH according to @ArkhamIntel and @EmberCN
Translation: Jump Trading may be selling ETH: they are currently… https://t.co/38qhf1bQo9
— MartyParty (@martypartymusic) August 4, 2024
The Bottom Line
Bitcoin’s recent crash to $50,000, its lowest level since February 2024, aligns with a broader financial market turmoil driven by fears of an impending global recession. Weak U.S. jobs data and a shift towards safe-haven assets have exacerbated the situation.
Moreover, speculation about large-scale crypto sell-offs, including potential moves by Jump Crypto, has further fueled concerns about forced liquidations and market instability.
