Bitcoin Price Plummets as Market Sentiment Turns Bearish
Bitcoin’s attempt to post modest gains during Friday’s U.S. trading session quickly fizzled, as the largest cryptocurrency plummeted from $65,000 to below $62,000. The sharp decline triggered a wave of liquidations, wiping off $290 million from long and short positions in the past 24 hours.
Bitcoin Falls Below $61,000
The recovery rebound ahead of the Federal Open Market Committee (FOMC) meeting and positive July Consumer Price Index (CPI) data set a bullish tone. However, the long-awaited rate cut was postponed, with the next decision pushed back to September, leading to a shift in market sentiment from bullish to bearish.
Bond yields and the dollar fell sharply on Friday after weak U.S. jobs data for July. While this scenario would typically boost risk assets like stocks and Bitcoin, this time was different. Bitcoin initially rose above $65,000 but soon succumbed to widespread risk aversion, falling below $62,000.
“High unemployment has led to weak macro sentiment, impacting cryptocurrencies and raising expectations of a future recession. The VIX crossed 28 today, its highest level since the local banking crisis on March 23. QCP Capital analysts noted: ‘Despite significant volatility over the past few days, the cryptocurrency market expects price stability over the summer.’”
Genesis Trading Transaction Sparks Market Turmoil
In addition to the bearish momentum, a significant transaction by Genesis Trading involving Bitcoin and Ethereum totaling over $1.5 billion sent shockwaves through the market. The move resulted in a 2.2% drop in Bitcoin and a 2.5% drop in Ethereum within an hour, causing liquidations totaling millions of dollars.
Both mainstream and emerging digital assets suffered during this period, with Bitcoin, Ethereum, and Solana experiencing significant liquidations. The market turmoil was exacerbated by recent supply shocks, including the sale of Bitcoins by the German government and the distribution of Mt. Gox assets.
Bitcoin ETF Outflows Add to Market Complexity
Outflows from Bitcoin exchange-traded funds (ETFs) further complicated the market situation, with net outflows totaling $237 million on August 2. Notable ETFs like Grayscale, Fidelity, and BlackRock saw substantial daily flows, contributing to the overall market instability.
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