5-8-2024 (NEW YORK) Bitcoin, the world’s largest digital asset, is facing intense selling pressure stemming from a wave of risk aversion sweeping across global markets. The original cryptocurrency has endured its most substantial weekly loss since the catastrophic collapse of the FTX exchange in 2022, underscoring the heightened volatility and uncertainty plaguing the industry.
As of Sunday, Bitcoin was trading near $58,500, having shed a staggering 13.1% over the preceding seven days. This dramatic decline marks the steepest weekly plunge since the tumultuous period surrounding FTX’s bankruptcy last year. Smaller cryptocurrencies, including Ether and the meme-crowd favorite Dogecoin, have also suffered substantial losses amid the market turmoil.
The cryptocurrency market’s woes are mirrored in the broader financial landscape, with U.S. equity futures plummeting early today. Concerns over the growth prospects of the world’s largest economy, coupled with weakness in tech giants and questions surrounding the hype surrounding artificial intelligence, have dampened investor sentiment.
Geopolitical tensions in the Middle East have further exacerbated the risk-averse climate, contributing to heightened investor skittishness.
On August 2, Bitcoin exchange-traded funds (ETFs) in the U.S. experienced their most significant outflows in nearly three months, reflecting waning investor confidence in the digital asset class. Moreover, Bitcoin’s price has tumbled through its 200-day moving average, a technical chart pattern that potentially opens the door for a deeper pullback towards $54,000, according to Tony Sycamore, a market analyst at IG Australia Pty.
Since hitting a record high of $73,798 in March, Bitcoin’s trajectory has been buffeted by a myriad of factors, including shifting political dynamics in the U.S. as pro-crypto Republican Donald Trump and Democratic opponent Vice President Kamala Harris – who has yet to detail a comprehensive digital asset policy stance – engage in a heated presidential race.
Adding to the market’s woes are the looming prospects of potential sales of Bitcoin seized by governments and the risk of a supply overhang from tokens returned to creditors through bankruptcy proceedings.
Amidst the turmoil, bond traders have amplified bets on U.S. interest rate cuts beginning in September, with the aim of supporting economic expansion. Sean Farrell, head of digital asset strategy at Fundstrat Global Advisors LLC, argues that the recent upheaval in traditional markets increases the likelihood of less restrictive monetary policy arriving sooner rather than later – a potential boon for the crypto market.
While Bitcoin’s year-to-date advance has moderated to approximately 34%, compared with a 19% climb in gold and a 9% jump in a gauge of global stocks, the current market dynamics underscore the enduring volatility and uncertainty that continue to shape the digital asset landscape.
