The crypto market witnessed its biggest three-day sell-off in 12 months amid weak jobs data in the United States and revived fears of a recession in the coming months.
Notably, the crypto market clocked its most considerable three-day sell-off in nearly a year, dropping $510 billion from its total market cap since August 2. The steep crypto sell-off came amid faltering equities performance, with the S&P 500 losing up to 4.4% in the same period.
The market drop was led by weak employment data, sluggish growth among major tech stocks, and revived worries of a recession.
Many major firms, including Intel and Microsoft, reported lower-than-expected second-quarter results, and market leader Nvidia was hit by expectations of imminent rate cuts in September, which saw capital flow back into smaller, budding firms.
The last time crypto sold off this steeply over three days was mid-August of 2023. Bitcoin (BTC) and Ether (ETH) also imploded massively amid an abrupt market sell-off on August 5, with the assets losing 10% and 18% respectively, at the time of writing. In the past week, Bitcoin and Ether have lost 20% and 28%, respectively.
Layer-1 network Solana’s (SOL) has been the most-hit crypto among the top 10 biggest tokens by market cap, dropping 30.6% since July 30.
Multiple market commentators also looked to a spate of sell-offs from Jump Crypto as a catalyst factor. The trading company has offloaded hundreds of millions of dollars in assets from its books in the past several days, according to Arkham Intelligence data.
The Crypto Fear & Greed Index – an indicator that mainly tracks market sentiment toward Bitcoin and crypto – has dropped back into ‘fear’ and displays a score of 26, according to Alternative.me.
Moving on, the crypto sector is facing another wild week. Most of the weekend’s losses must be resolved by an uptick in spot and derivatives activity from traditional financial institutions. The co-founder of trading resource Material Indicators, Keith Alan, wrote in his August 4 X post:
“Bitcoin has entered the CME Gap, but technically, it can only be filled during TradFi trading hours.”
Bitcoin Dropped Below $53K, Depleting $600M In Leveraged Longs
An abrupt crypto market implosion wiped out at least $600 million in leveraged long positions, as Ether, Bitcoin, and other cryptos dropped steeply.
Bitcoin’s price crashed below $50,000 on August 5 in a drop that saw the top crypto lose over 10% within two hours. However, BTC has regained some ground and trades above $54,000, according to TradingView data.
The last time BTC traded below $53,000 was on February 26, with the price rallying after the approval of spot Bitcoin exchange-traded funds (ETFs) in the US.
Ether’s price dropped by 18% from $2,695 to as low as $2,118 in two hours. Ether has since regained its momentum slightly to trade for $2,358 at the time of writing, according to TradingView data.
While speaking to reporters, eToro market analyst Josh Gilbert said cryptocurrency is mostly a “leading indicator of sentiment,” insisting that when investors panic or look to deleverage, crypto is mostly the first asset on the list. Gilbert added:
“However, in these scenarios, it’s important to zoom out. Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets.”
Despite the steep decline, Gilbert shared an optimistic outlook for crypto in the coming months:
“When you invest in crypto assets, you’re stepping into the ring of volatility. This is a small jab for crypto, not even a black eye. We’ve got more rounds left of this bull market before the bell rings.”
$740M In Leverage Positions Wiped Out
The steep plunge saw over $740 million in leverage positions wiped out across the crypto market within 24 hours, with around $644 million in leveraged longs getting liquidated, according to CoinGlass data.
Interestingly, traders aiming to gain leveraged exposure to Ether were the hardest hit, with at least $256 million in ETH longs cleaned up, while $231 million in BTC longs were forcibly closed.
There has been considerable growth in the open interest in ETH over the past several months, with traders flocking to enjoy some exposure to the asset in the lead-up to and aftermath of the approval of spot Ether ETFs in the United States.
The steep decline in crypto asset prices came amid a sharp sell-off in the Japanese stock market, with the Nikkei 225 down 7.1% in the early trading hours. On August 2, Japanese bank stocks recorded their worst day of performance since 2008, buffeted by a decision from the nation’s central bank to hike interest rates.
The abrupt crash saw up to $500 billion wiped out from the total crypto market cap in three days – the biggest 72-hour wipeout in nearly a year.
Multiple market commentators have attributed the recent drop to weak jobs data in the US, slowed growth among market-leading tech firms in the stock market, and concerns about mass selling from crypto trading company Jump Crypto.
