Bitcoin falls below $55,000 in market sell off, Ethereum under $2500 in worst crypto crash since 2022
The cryptocurrency market has seen a sharp decline, with Bitcoin and many altcoins seeing daily drops of 20 to 50%. There have been assertions that this sudden and catastrophic collapse is the worst since FTX's collapse in 2022.
Coingecko data shows that the market capitalization of cryptocurrencies has fallen to $2 trillion, a decrease of more than 8% in just the past day. This selloff isn't limited to cryptocurrencies; other global markets are also being negatively impacted, making this one of the worst equities trading periods in recent history.
According to a video posted via YouTube by analyst Miles Deutscher, Bitcoin has been driving the market's downturn by breaching important support levels. After breaking through the crucial $60,000 barrier, the cryptocurrency experienced a series of liquidations that caused its value to plummet as low as $50,000.
In the last day alone, over $1 billion has been liquidated, and Bitcoin was ranked the first in terms of liquidation. This is one of the biggest liquidation cascades since the collapse of FTX. Approximately $302 million of these were long positions, as CoinMarketCap data shows that at the time of publication, BTC had dropped by nearly 7.85% to $54,342.
The funding rate for bitcoin futures has turned negative over the last day, indicating that traders are placing bets on a drop in the price of bitcoin and that there is a greater demand for short positions.
The data also indicated that Ethereum experienced large liquidations as well; of the $346 million liquidated, $297 million were long positions. On the previous day, Ethereum's price fell by over 12.51% to $2,468 according to CoinMarketCap data.
Bitcoin and Ethereum prices decline
Stocks linked to cryptocurrencies fell and then pulled back. The largest US exchange, Coinbase Global Inc., saw a decline of more than 20% at one point during the day, while MicroStrategy Inc., a Bitcoin proxy, saw a decline of nearly 30%. There were declines of up to 15% and 20%, respectively, in miners Marathon Digital Holdings Inc. and Riot Platforms Inc.
The worries about the state of the economy and whether large investments in artificial intelligence will live up to the hype surrounding the field are reflected in the decreases that coincide with a sharpening selloff in the global stock market. The past week has seen a decline in cryptocurrency markets due to geopolitical tensions in the Middle East and disappointing earnings reports from tech companies.
Following Trump's rally, the market initially declined, giving rise to the narrative of sovereign Bitcoin. But after that, the market crashed, in part because of Kamala Harris's information about growing odds, which were perceived as worse for cryptocurrencies than Trump's possible presidency.
Price of Ethereum drops due to market makers selling off
The current downturn in the cryptocurrency market is largely due to the Ethereum selling habits of market makers. During the peak of Ether's price, which was $3,000, to below $2,200 on August 3, five of the leading market makers sold a total of 130,000 Ether ETH, valued at $290 million at today's price.
Flow Traders came in third place with $3,620 ETH, while Jump Trading and Wintermute are the market makers, having sold over 47,000 ETH and over 36,000 ETH, respectively. Furthermore, a research note by 0xScope states that GSR Markets sold 292 ETH and Amber Group sold 65 ETH.
Since Aug. 3, crypto market makers have deposited 130,000+ $ETH to CEXes, according to 0xScope research.
— 0xScope (@ScopeProtocol) August 5, 2024
Over that time, $ETH crashed from $3,000 to $2,100.
Here's a breakdown of their recent deposits: https://t.co/7CYCxVWPtS
Case in point: Jump Trading started dumping $ETH… https://t.co/7xCMotwRK5
Although Jump Trading started selling Ether first, Wintermute sold a lot more, as reported by 0xScope in an Aug. 5 X post. A greater number of ether sales by market makers and major holders may cause prices to drop and an increase in investor panic selling.
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