For the first time since February, Bitcoin‘s ($BTC) price has dropped below the $50,000 mark, hitting a low of $49,351 before rebounding to around $51,000.
The top coin’s dominance in the cryptocurrency market also reached 58% as the overall market faced a substantial collapse.
Over 17% of the total market capitalisation has been wiped out, with the market cap falling from approximately $2.16 trillion to around $1.76 trillion on 5 August, according to CoinMarketCap.
The early hours of the day saw a dramatic start to the $BTC’s price decline, leading to $600 million in leveraged long positions being liquidated.
The market crash also affected Ethereum ($ETH), which lost nearly 20% of its value within two hours. $ETH’s price dropped to around $2,172 but recovered to approximately $2,200.
Shifting market sentiment
The cryptocurrency market has experienced its most significant sell-off in three days since nearly a year ago, with over $500 billion lost.
This occurred as the S&P 500 equities performance dropped by over 4% during the same period.
Concerns over a potential recession, poor employment data in the United States, and sluggish growth among leading tech stocks contributed to the market’s decline.
The Crypto Fear & Greed Index, which gauges market sentiment, has shifted from a value of 67 (“Greed”) to 26 (“Fear”) since 29 July.
This shift indicated a growing sense of caution among investors amid the market downturn.
Bitcoin’s price crash has also narrowed the gap between futures and spot prices, reducing the appeal of carry trades.
The annualised three-month futures premium on Binance has dropped to 3.32%, the lowest since April 2023.
Similarly, futures premiums on exchanges like OKX and Deribit have also declined.
Macroeconomic factors have also played a role in the recent market turmoil. The Bank of Japan’s unexpected interest rate increase and the strengthening of the Japanese yen against the US dollar have impacted global markets, including cryptocurrencies.
This development has led to higher interest rates for borrowers and affected other assets like Nasdaq futures and the S&P 500.
Economic concerns
A report by 10x Research highlighted concerns about the United States’ economic strength and its potential impact on the crypto market.
The report suggested that Bitcoin’s value could remain below the psychological mark of $50,000, raising red flags for other cryptocurrencies.
The ISM Manufacturing Index’s downturn has been cited as a core factor in these concerns.
The founder of 10x Research, Markus Thielen, advised caution for crypto traders, noting that the market structure, including fiat-to-crypto on-ramps, has been weak for months.
He indicated that significant players are unlikely to invest amid high volatility and unpredictable prices.
Big liquidations
Alongside this, Jump Crypto has been actively liquidating hundreds of millions of dollars in cryptocurrency assets. This has raised concerns among traders and investors.
Blockchain data revealed that since 3 August, addresses associated with Jump Crypto have seen an inflow of approximately $300 million, primarily from exchange wallets.
Concurrently, the firm’s wallets have registered outflows of around $80 million to major exchanges like Coinbase, Gate.io, and Binance.
A substantial portion of the liquidated assets includes Ethereum. According to data provided by Arkham Intelligence, Jump Crypto has been converting over $500 million worth of Lido’s staked Ethereum (wstETH) into $ETH since 25 July, coinciding with the launch of US-based spot Ethereum ETFs.
Despite these large transactions, Jump Crypto still retains about $130 million in staked $ETH, while nearly $200 million in unstaked ETH has been moved to various exchanges.
The liquidation activity has prompted concerns about market stability and potential impacts on Ethereum’s price. The significant sell-off by a major player like Jump Crypto can contribute to increased volatility and downward pressure on prices, affecting the broader crypto market.
