The prices of Bitcoin (BTC) and Ethereum (ETH) along with other digital assets experienced a sharp decline today, Monday, due to a significant withdrawal of investor risk appetite in global markets. At 6:35 UTC, the price of BTC was down by 12.6% at $50,827, continuing a downward trend that began last week when it fell by 13.1%, marking its largest drop since the collapse of the FTX exchange in 2022. The value of ETH also dropped by 17% to reach $2,221, deepening its losses to 30% over the past week, the largest decline since 2021. Additionally, the total value of the entire crypto market decreased by nearly 12% over the last 24 hours.
This decline comes amid growing investor concerns about the possibility of the U.S. economy entering a recession, exacerbated by rising geopolitical tensions in the Middle East. This combination of uncertain economic conditions and global instability has led investors to shy away from riskier assets. Unexpected data indicated weak job growth alongside a rising unemployment rate for July, highlighting a notable slowdown in the labor market and adding to recession fears. Consequently, the Nasdaq index fell by 2.43%, and the S&P 500 decreased by 1.84%, according to Flipster's CEO, Youngjin Kim.
Kim pointed out that "the overall market mood has shifted due to diminishing prospects for Trump’s victory in the U.S. presidential election and increasing expectations for Kamala Harris." Additionally, the firm Jump Trading transferred significant amounts of ETH to a centralized trading platform amid anticipations of widespread sell-offs in anticipation of investigations by the Commodity Futures Trading Commission (CFTC), which has raised investor concerns.
He added that "these developments have led investors to await more clarity regarding Jump Trading's directions and presidential election forecasts before potentially buying again at the current low levels." Bitcoin exchange-traded funds (ETFs) experienced the largest outflows in three months on August 2, raising speculations about the possibility of a new bear market. Investors are currently monitoring the situation closely to see whether these ETFs can attract new buyers given the declining prices or if selling pressures will increase.
Typically, large withdrawals from Bitcoin ETFs suggest that a broader wave of selling could hit the market, potentially deepening Bitcoin's wounds and increasing its losses, especially since a recent withdrawal of $237 million represents the largest single-day outflow in three months and the fourth-largest withdrawal since the ETF's launch in January, highlighting the prevailing bearish sentiment among investors.
Another challenge for crypto markets lies in potential government Bitcoin sales and the likelihood of increased supply resulting from creditors recovering assets from bankruptcies. Furthermore, forced liquidations of long speculative positions in crypto derivatives amounting to $830.8 million over the last 24 hours, according to Coinglass data, indicate worsening losses for leveraged speculators.
