The selling pressure on the crypto market continues accelerating in the first week of August. Initiated with the Bitcoin price reversal from $70,000, the bears took advantage of the market’s fear, uncertainty, and doubt (FUD) around geopolitical tension in the Middle East and fears of recession. This renewed sell pressure triggered a fresh correction in sentiment in most major altcoins as Ethereum dipped below $3000 on Friday. Here are five reasons behind today’s crypto market crash.
1. Disappointing Nonfarm Payrolls Data
The latest U.S. nonfarm payrolls report revealed that only 114,000 jobs were added in July, significantly below the anticipated figures. Additionally, the unemployment rate unexpectedly rose to 4.3%, marking its fourth consecutive increase.
According to BlackRock’s Jeffrey Rosenberg, “The reaction here is probably the right reaction. We’ve had a string of disappointing data, and that’s pushing more concerns about the economic outlook.” The weaker-than-expected jobs data has stoked fears of a slowdown, impacting risk assets, including cryptocurrencies.
2. Rising Recession Fears
The weak jobs report has intensified recession fears, with economist Peter Schiff amplifying these concerns. Schiff argued, “Rate cuts will fail to revive the economy or employment, but they’ll heat up already hot inflation. This isn’t your father’s stagflation. It’s much worse!”
His comments highlight fears that the Federal Reserve’s potential rate cuts might not prevent a recession and could instead accelerate inflation. These concerns fuel broader market volatility and catalyzed today’s crypto market crash.
Furthermore, Schiff criticized the poor performance of Spot Ethereum ETFs as these investment products continued outflows. He also predicted that at this rate, the ETH price would be back at the $2,000 level. Currently, ETH is barely holding above $3,000.
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3. Bitcoin Long Liquidations
The cryptocurrency market has seen a surge in long liquidations over the past 24 hours. Approximately $241.07 million worth of long positions were liquidated, accounting for 90% of total market liquidations. This large-scale unwinding of positions has intensified the downward pressure on crypto prices.
In addition, BTC price crash, from $65,000 to $60,000, reflects this significant liquidation impact. Coinglass data also revealed that the 14% drop in BTC price over the past five days also resulted in around $1 billion worth of long positions being liquidated.
4. Stock Market Decline
The broader stock market decline has further weighed on the crypto market crash. On Friday, August 2, stocks fell sharply as the weaker-than-anticipated jobs report ignited worries of an economic downturn. The broad market index plunged 1.84% to end at 5,346.56. In addition, the
Nasdaq Composite lost 2.43%, closing at 16,776.16. This brings its decline from a recent all-time high to over 10%. Furthermore, the Dow Jones Industrial Average lost 610.71 points, or 1.51%, finishing at 39,737.26, with the index plunging as much as 989 points at its session low. This stock market decline has potentially spilled over into the crypto market.
5. Bitcoin & Ethereum ETF Outflows
Both Bitcoin and Ethereum ETFs have faced significant outflows, contributing to the market’s woes. Bitcoin ETFs saw $237.4 million in outflows on August 2, with a weekly total of $80.4 million. Meanwhile, Ethereum ETFs experienced outflows totaling $54.3 million for the day and $169.4 million for the week.
Grayscale’s ETHE saw $61.4 million in outflows on Friday. These negative ETF flows, coupled with Genesis Trading’s bankruptcy repayments in BTC and ETH, may have exacerbated the crypto market crash.
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Kritika Mehta
Kritika boasts over 2 years of experience in the financial news sector. Currently working as a crypto journalist at Coingape, she has consistently shown a knack for blockchain technology and cryptocurrencies. Kritika combines insightful analysis with a deep understanding of market trends. With a keen interest in technical analysis, she brings a nuanced perspective to her reporting, exploring the intersection of finance, technology, and emerging trends in the crypto space.
Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
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