In a swift and unexpected downturn, the cryptocurrency market experienced a significant crash, with Bitcoin’s value dropping below $53,000 on August 5. This sharp decline wiped out over $600 million in leveraged long positions.
Bitcoin’s price hit a low of $52,500, marking a 10% drop from its previous $58,350 in less than two hours.
Although it slightly recovered, trading at $54,384 later, the impact was profound.
Ether (ETH) also faced a severe drop, plunging 18% from $2,695 to $2,118 within the same period. It later traded at $2,358, showcasing a minor rebound.
The significant drop in both Bitcoin and Ether caused widespread panic among investors, triggering massive sell-offs and liquidations.
eToro market analyst Josh Gilbert highlighted that the cryptocurrency market often reflects investor sentiment. He noted that during periods of panic or deleveraging, cryptocurrencies are usually the first assets to be sold off.
Despite the steep decline, Gilbert remains optimistic about the market’s future, suggesting that the Federal Reserve’s anticipated rate cuts could be beneficial for crypto assets.
The market’s sudden plunge resulted in over $740 million in leveraged positions being wiped out within 24 hours.
Ether traders were the hardest hit, with more than $256 million in ETH longs liquidated, followed by $231 million in BTC longs.
The broader market instability was further exacerbated by a significant sell-off in the Japanese stock market, with the Nikkei 225 dropping 7.1%.
This decline was partly driven by Japan’s central bank’s decision to hike interest rates, leading to the worst performance for Japanese bank stocks since 2008.
The crypto market’s downturn also coincided with weak jobs data in the United States and concerns over mass selling by the crypto trading firm Jump Crypto.
Over the past three days, the total crypto market capitalization lost approximately $500 billion, marking the largest wipeout in over a year.
