Cryptocurrencies took a significant hit Monday as global market risk aversion triggered a sharp selloff.
Bitcoin plunged over 10% at one point, and Ether saw its steepest fall since 2021.
By 10:40 a.m. in Singapore, Bitcoin had dropped 8.5%, trading at $54,100. This follows a 13.1% drop last week, reminiscent of the FTX exchange fallout.
Ether, meanwhile, plummeted over 20% before recovering slightly to $2,275. Major tokens across the board suffered heavy losses.
This crypto rout coincides with an intensifying global stock selloff. Investors are jittery over economic uncertainties and the questionable payoff of hefty investments in AI.
Rising geopolitical tensions in the Middle East are adding fuel to the fire.
On August 2, US Bitcoin ETFs recorded their largest outflows in three months. The question now is whether these products will attract dip buyers or face further exits.
Carry Trade Unwinds
Digital assets are partly reeling from the unwinding yen carry trade, as speculators grapple with higher interest rates in Japan.
Hayden Hughes of Evergreen Growth highlights the impact of increased hedging costs due to volatile US dollar-Japanese yen trading.
Bitcoin, once at a record high of $73,798 in March, is now influenced by various factors, including the US political landscape.
As pro-crypto Republican Donald Trump and Democratic Vice President Kamala Harris vie for the presidency, the market remains wary of potential policy shifts.
Additionally, the market is weighed down by potential Bitcoin sales from government seizures and a supply overhang from tokens returned through bankruptcy proceedings.
Fed Outlook
Bond traders are betting on US interest-rate cuts starting in September to boost economic growth. Sean Farrell of Fundstrat Global Advisors LLC sees this as a positive sign for crypto.
On Monday, Bitcoin touched levels last seen in February, while Ether retraced to year-start prices. Investor reactions to new US spot-Ether ETFs remain uncertain.
Business expert Justin D’Anethan of Keyrock noted that Ether led the crypto selloff, driven by social media rumors of institutional selling.
Coinglass data revealed about $700 million of bullish crypto derivatives positions were liquidated in the past 24 hours, indicating unwinding leveraged bets.
Khushboo Khullar of Lightning Ventures remarked that the broad stock slump sparked investor panic, leading to a liquidity rush to meet margin calls. She views the crypto downturn as a “fine buying opportunity.”
Despite the turmoil, Bitcoin’s year-to-date gain stands at around 24%, compared to gold’s 19% rise and a 9% increase in a global stock gauge.
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