While Ether, the second-largest cryptocurrency, saw its worst loss in over three years, the largest cryptocurrency in the world dropped to its lowest point in almost half a year.
Bitcoin is dancing
Based on statistics from CoinDesk, Bitcoin has been trembling since this morning’s daybreak as the market price has been steadily declining from over 60,000 USD to about 54,000 USD at around 8:00 am. Following that, this currency struggled and made a little recovery around the above point.
Early in the afternoon, there was another trembling in the market. Bitcoin broke through a significant support level at 1:24 p.m., plunging all the way to 49,314 USD/unit, the lowest since mid-February. The biggest cryptocurrency in the world dropped about 14% of its market value in a single day.
Since many experts had previously anticipated that Bitcoin would need to hold $50,000 in order to avoid the subsequent decline below $48,000, the dip below the aforementioned support barrier is quite concerning.
How about other currencies?
The second-largest cryptocurrency in the world, Ether, had a more severe decline, falling from almost 3,500 USD to 1,700 USD per token, or 25%. Since May 2021, this daily adjustment has been the worst. Other cryptocurrencies like XRP, Solana, and Binance Coin also had declines of 20% or more.
The Fear and Greed Index shifted negatively as a result of this event, falling to its lowest point since early July. Using price, volatility, and social media data, the index determines whether investors are fearful—which often signals a local bottom—or greedy, which signals a market peak.
When bitcoin futures saw more than $840 million in liquidation on the previous day, the market became volatile and there was a worse sell-off than yesterday. A stronger Japanese yen and reports that market leader Jump Trading is closing its bitcoin operations are now driving the shakeout.
Specifically, more USD than 304 million was liquidated in Ether futures contracts than in Bitcoin. Moreover, futures tracking Pepe, XRP, Dogecoin, and Solana saw collective liquidations of $75 million.
The global financial system is at great risk
Liquidation orders have been imposed on over 200,000 individual dealers. According to data from the cryptocurrency exchange Huobi, traders holding long orders—a gamble on higher prices—accounted for almost 87% of those impacted.
In addition to cryptocurrencies, a wave of aggressive stock sales has caused significant volatility in the global financial system as investors fear that the US may experience a recession. The US employment report from July startled many with considerably poorer than anticipated figures, igniting fears about the possibility of an impending recession.
Given indications of a weakening US economy, traders are placing a lot of money on the likelihood that the US Federal Reserve (Fed) would shortly lower interest rates. Leading financial firms like Citigroup and JPMorgan Chase employ economists who even forecast that the Fed may cut rates by as much as 0.5 percentage points in September and November.
