Bitcoin’s dramatic $20,000 plunge in just a week has left the cryptocurrency community reeling. Ethereum hasn’t fared any better, retreating 40%. Meanwhile, Berkshire Hathaway’s recent sale of Apple stock adds a layer of intrigue as global markets tumble. As Bitcoin starts the first full week of August, it finds itself hitting the lowest levels since February, shocking many who had anticipated a rise to new all-time highs just days earlier. Now, with Bitcoin down nearly $18,000 in mere days, the cryptocurrency is mirroring the broader market’s fear of an impending recession in the United States.
The rapid downturn in crypto sentiment is astonishing. Just a week ago, Bitcoin was trading near $70,000, and many analysts were bullish on its prospects. Now, Bitcoin has plummeted 25%, causing long positions worth hundreds of millions to be liquidated. Ethereum, the largest altcoin, is down nearly 40% in the same period. Even Japan’s stock market has experienced harsher losses than BTC/USD, underscoring the global nature of this market correction.
As Bitcoin dips below $50,000, the question on everyone’s mind is: where’s the bottom? Bitcoin has once again surrendered multiple bull market support levels, pushing a significant portion of its holders into unrealized losses. Some believe that only central bank intervention can halt the slide, while others argue that a stock market correction was inevitable. Here’s a closer look at the state of Bitcoin and other markets as a new trading week begins on Wall Street, with uncertainty hanging thick in the air.
Bitcoin’s Price Plunge: A Harsh Reality
Bitcoin bulls have taken a severe hit. BTC/USD is trading at levels last seen 25 weeks ago, and crypto liquidations have surpassed $1 billion in the past 24 hours, as per data from CoinGlass. The combined crypto market cap has shed over $500 billion in the last three days, a yearly record. According to Cointelegraph Markets Pro and TradingView, Bitcoin hit lows of $49,647 on Bitstamp, a level last seen on February 14.
“Bitcoin & Crypto are in capitulation as everything drops 10-18% overnight,” stated Michaël van de Poppe, founder and CEO of trading firm MNTrading, reflecting the surprise and dismay felt by many. The pace of market losses accelerated with the start of the Asian trading session, catching even seasoned traders off guard. Popular trader Jelle expressed unease, while Credible Crypto hoped that $50,000 would hold as a support level, though he acknowledged the need for more confirmation before drawing any firm conclusions.
Veteran trader Peter Brandt warned that further declines are possible from current levels, capturing the sentiment of a market bracing for more volatility.
Buffett’s Apple Sale: A Timely Move?
While the crypto market’s downturn is worrisome, it seems to be part of a broader trend affecting global stock markets. Japan’s Nikkei has experienced a record-breaking dive, marking the largest two-day drop in its history. This surpasses even the infamous “Black Monday” of 1987. Contagion is spreading, with South Korea halting all sell orders as markets crash. The Nikkei’s losses are now outpacing Bitcoin’s on monthly timeframes.
In the U.S., signs of a potential knee-jerk reaction to Asia’s market woes are emerging. Nvidia, once a market darling, is now down 30% from its June all-time high, wiping out $1.2 trillion in market cap. Warren Buffett’s Berkshire Hathaway appears to have made a shrewd move by selling nearly 50% of its stake in Apple during the second quarter. Apple was trading at $216 per share at the end of Q2, making Buffett’s timing seem impeccable.
Federal Reserve: Under Pressure
The latest market turmoil is putting additional pressure on the U.S. Federal Reserve. Last week, the Fed opted to maintain high interest rates, hinting that a rate cut could come at its next meeting in September. Markets had already priced in a 100% chance of a rate cut, favoring a minimal 0.25% decrease. However, the latest data from CME Group’s FedWatch Tool shows that expectations are shifting. The likelihood of a larger 0.5% cut has surged from 22% on August 3 to 96.5%.
These numbers indicate mounting pressure on the Fed to shield the economy from the fallout of its hawkish policies. As recession fears grow, criticism of the Fed is intensifying. Charles Edwards, founder of Capriole Investments, criticized the Fed for being too slow to ease monetary policy. Anthony Pompliano of Professional Capital Management speculated that the Fed might take emergency measures, such as an emergency rate cut, to stabilize the market.
Bitcoin Speculators: Feeling the Pain
Bitcoin’s plunge below $50,000 has left many recent buyers in a difficult position. The short-term holder market value to realized value (STH-MVRV) metric from Glassnode reveals that speculators are facing substantial unrealized losses. As of August 4, the metric stood at 0.88, confirming net losses for short-term holders. This number has likely fallen further as losses continue to mount.
Glassnode’s weekly newsletter, The Week Onchain, highlighted the risk of panic selling among investors facing high levels of unrealized losses. However, long-term holders, or “diamond hands,” remain committed to holding their Bitcoin. As of late July, long-term investors held 45% of the network’s wealth, indicating their patience for higher prices.
Market Sentiment: From Greed to Fear
Unsurprisingly, market sentiment has swung from “extreme greed” to “extreme fear.” The Crypto Fear & Greed Index, which was nearing “extreme greed” territory on July 29, has plummeted to 26/100 as of August 5. This sharp decline reflects a collapse in investor confidence, and the index may have further to fall.
Research firm Santiment noted that discussions about buying the dip haven’t spiked as much as expected, indicating that more panic selling may be needed to establish a market bottom. “Is this THE dip?” the firm queried, suggesting that the real reaction might come as the U.S. wakes up to Monday’s market shock.
In conclusion, the current market turmoil is a stark reminder of the volatility inherent in both crypto and traditional markets. While the immediate future remains uncertain, long-term holders and seasoned investors may find opportunities amid the chaos. However, caution and thorough research are essential for anyone navigating these turbulent waters.
