Bitcoin (BTC) had a shocking start to the first week of August as stock markets around the world saw record declines.
The BTC price drop took everyone by surprise as BTC/USD fell to its lowest level since February.
Bitcoin has fallen to nearly $18,000 in a matter of days, joining a worrying sell-off across risk assets globally amid talk of a recession in the United States.
The speed of reversals in cryptocurrency market sentiment is dazzling. Just a week ago, Bitcoin was trading near $70,000, and according to analysis, a new all-time high is expected to follow.
The BTC price, which is currently down 25%, is busy liquidating long positions worth hundreds of millions of dollars.
Altcoins are faring even worse, with the largest altcoin, Ether (ETH), down nearly 40% over the same period. Even the Japanese stock market has seen bigger losses than BTC/USD, a nod to the global nature of the current market reset.
No one knows what will happen next, but the biggest concern for cryptocurrency holders is where the bottom will be.
Bitcoin has once again broken multiple bullish support levels, leaving many of its holders with unrealized losses.
While some believe that only central bank intervention will save the market, others argue that despite its brutal nature, a correction is only a matter of time.
Cointelegraph takes a look at the state of Bitcoin and other cryptocurrencies as a new trading week begins on Wall Street and uncertainty spreads across crypto markets.
Bitcoin Price Plunges Below $50,000 in Brutal Crypto Crash
To say that Bitcoin bulls have suffered huge losses in the current environment is an understatement.
Not only is BTC/USD trading at levels not seen in 25 weeks, but crypto liquidations have surpassed $1 billion in the past 24 hours, according to monitoring firm CoinGlass.
In total, the total cryptocurrency market cap has lost more than $500 billion over the past three days, setting a new yearly record.
According to data from Cointelegraph Markets Pro and TradingView, Bitstamp’s lowest price was $49,647. This figure was last seen on February 14.
“Bitcoin and cryptocurrencies have capitulated, with everything crashing 10-18% overnight,” Michael van de Poppe, founder and CEO of trading firm MNTrading, summed up in part in a response to X.
Like many, Van de Poppe was surprised to see the pace of market losses accelerate with the first Asian trading session of the week for stocks.
Popular trader Zell admitted he felt “uncomfortable in the moment” that day, echoing concerns across the trading community.
Fellow trader Credible Crypto was hoping that at least $50,000 would hold as support.
“BTC hits all-time low, weekly demand increases, surpasses upper TF zone at 49k (for now), while $ETH jumps right into its own HTF zone and is close to breaking out,” he explained in part of his latest X coverage.
Credible Crypto added that more evidence is needed before establishing a firm baseline for the market, citing a July chart showing areas where mass demand is likely to occur.
He added, “Ideally, BTC will never reach HTF demand below 50k and this drop is the worst case scenario.”
“I tend to believe this is true, but there is absolutely no confirmation yet, so we will be watching for further signs of a full-scale reversal in the PA.”
Nonetheless, veteran trader Peter Brandt warned that further declines from current levels could easily occur.
He concluded the recent events by saying, “Mad Sunday is the day that ends a crazy week and starts an even crazier week.”
Buffett’s Apple Sale Adds Significance to Stock Selling
While the cryptocurrency crash is causing distress to investors due to its extreme volatility, it appears to be merely a reaction to larger problems in global stock markets.
A big sell-off is expected in Japan early next week, as was the case late last week, with the Nikkei index posting a record drop.
As of this writing, this is expected to be the biggest two-day decline in Nikkei 225 history.
Commentators say the current situation is worse than the 1987 global stock market crash known as ‘Black Monday’ and its aftermath is spreading.
According to part of an ongoing X commentary on trading resource The Kobeissi Letter, “South Korea has now halted all sell orders as the market has plummeted.”
“Panic selling has arrived.”
In fact, the Nikkei has fallen so much that its losses are outpacing Bitcoin on a monthly basis.
In the US, there are already signs that a knee-jerk reaction to Asia is underway. Nvidia stock, previously a classic outperformer, is now down 30% from its June high, erasing a massive $1.2 trillion market cap.
“If we look at it more concretely, there are only seven publicly traded companies in the world with a market capitalization of more than $1.2 trillion,” said Kobeishi.
“NVIDIA has lost more market cap than Tesla ($TSLA) and Walmart ($WMT) combined. It’s truly historic.”
Warren Buffett’s Berkshire Hathaway is likely to sell about 50% of its Apple stake, according to its second-quarter earnings report, so the stock is also paying attention to the company’s smart move.
APPL was trading at $216 per share at the end of the second quarter.
Fed Holds Emergency Meeting as Interest Rates Still Soar
The recent panic has further strained the U.S. Federal Reserve, which last week decided to keep interest rates high but hinted gently at a possible rate cut at its next meeting in September.
The market had already priced in a 100% chance of a rate cut, with the majority viewing a cut of at least 0.25% as most likely.
But the latest data from CME Group’s FedWatch tool shows those expectations are being overturned.
The odds of a larger 0.5% cut have risen from just 22% on August 3 to 96.5%.
The numbers show that pressure will grow on Federal Reserve officials to protect the economy from the damage caused by years of hard-line policies.
Criticism of the Federal Reserve, which announced it would hold an emergency meeting on August 5 amid recession fears, has been readily available.
“Just as the Fed was too slow to tighten policy in 2021, it appears it will be too slow to ease in 2024,” Charles Edwards, founder of quantitative bitcoin and digital asset fund Capriole Investments, wrote in part of a X commentary on the weekend’s rise in unemployment.
Anthony Pompliano, founder of investment firm Professional Capital Management, speculated that the Fed could take emergency action.
“If there is enough pain in asset prices, we could get an emergency rate cut to calm the markets. It’s very unlikely, but the Fed has a lot of options with rates above 5%,” he argued.
Bitcoin speculators’ holdings plummet
Unsurprisingly, BTC/USD gave up many bullish support levels as it plunged below $50,000.
But for recent buyers, the pain is especially severe. Short-term holders of Bitcoin are now facing serious unrealized losses.
The latest data from on-chain analytics firm Glassnode provides a concrete picture of the extent of the problem faced by speculators, captured via the Short-Term Market Value to Realized Value (STH-MVRV) metric.
STH-MVRV measures the total cost basis of unspent transaction outputs (UTXOs) from up to 155 days ago at current prices.
The current figure of 0.88 as of August 4 confirms the net loss of the STH cohort, and it is likely that the figure will be much lower as losses increase.
Glassnode recently stated in their weekly newsletter “The Week Onchain” that high levels of unrealized losses could lead to panic selling by investors.
“The group was in financial difficulty, having lost more than 90 percent of its supply by the end of July,” it wrote.
Glassnode later added that Bitcoin’s “diamond hands”, or long-term holders, had committed not to sell as of late July.
“Long-term investors currently hold 45% of the network wealth, which is relatively high compared to macro cycle peak events. This highlights that LTH is holding its coins in HODL mode, patiently waiting for higher prices to trigger a selloff in the market,” he suggested.
There is no talk of buying
Not surprisingly, but nonetheless significant, cryptocurrency market sentiment has once again reached a peak of “extreme fear.”
Related: Bitcoin Drops Below $50K: Crypto Markets Plunge 17%
The latest Crypto Fear & Greed Index shows that investor confidence has collapsed.
On July 29, “extreme greed” was on the horizon as markets headed toward retesting all-time highs, but a few days later, that scenario was far from reality.
As of August 5, Fear and Greed are at 26 out of 100 and are likely to fall further as lagging indicators.
Market research firm Santiment even suggested that there may not be enough panic to warrant a buying frenzy and convince investors of a long-term market bottom, after analyzing the social media landscape.
“Is this THE Deep?” A question has been raised about X.
“There has been a surge in talk of buying, but not as dramatic as the drop. A bigger reaction is expected as the US wakes up from Monday morning’s shock. Emotional selling will only hasten the timing of the crypto rally.”
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.