The cryptocurrency market has experienced a significant downturn, erasing $270 billion in market value as major digital assets record sharp declines.
Bitcoin, the leading cryptocurrency by market valuation, fell below the $50,000 Mark, a level it hadn’t reached since February this year.
Ether, the second-largest cryptocurrency, also suffered substantial losses during this market selloff. The crypto asset dropped 15% to $2,321.95, bringing its three-day loss to 23%. This move follows a broader market sell-off that began last week when a weaker-than-anticipated July jobs report renewed investor fears of recession.
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The selloff in the crypto market coincided with a broader slide in equities in Asia-Pacific markets. Japan’s Nikkei 225 dropped as much as 7%, extending losses that began last week after the Bank of Japan announced it would hike its benchmark interest rate to the highest level in 16 years.
Commenting on this, a crypto market analyst at Japanese Bitcoin exchange Bitbank, Yuya Hasegawa said,
“Until last Wednesday, everybody was thinking that inflation was going down gradually and the economy was relatively strong, so the Fed would start cutting rates with a successful soft landing of the economy. However, July’s U.S. manufacturing PMI and jobs report came in way weaker than the market expected and now investors are worrying about the possibility of recession and dumping risk assets.
“That said, the market’s reaction has been a tad excessive, given there is no absolute evidence that the economy is in recession yet, we will likely see some recoil this week.”
Also speaking to Cointegraph, eToro market analyst Josh Gilbert said crypto is often a “leading indicator of sentiment”, noting that when investors panic or look to deleverage, crypto is often the first asset on the list.
In his words,
“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”.
The sharp downward crypto market decline has now seen over $740 million in leverage positions wiped out in the last 24 hours, with just over $644 million in leveraged longs being liquidated, according to CoinGlass data.
Notably, traders looking to gain leveraged exposure to Ether were the hardest hit, with over $256 million in ETH longs cleaned up, while $231 million in BTC longs were forcibly closed.
According to experts, the latest crypto wipeout will be felt by a broader base of investors after the SEC this year approved new spot exchange-traded funds for bitcoin and ether. The ETFs have seen hundreds of millions of dollars flow into the coins.
Analysis has revealed that August has historically been a red month for Bitcoin with a 63% decline rate. Meanwhile, despite the decline several crypto traders have expressed their bullish sentiment on the crypto asset.
Meanwhile, amid the broader market, there are speculations that a wave of financial collapses in multiple markets is happening across the world.
An X user @ShadowofEzra wrote,
“A wave of financial collapses in multiple markets is happening across the world. Black Swan or Black Monday?
“Stocks and crypto have plunged as investors start to panic while a global sell-off deepens. Absolute chaos in Japan as stocks are on track for their biggest decline in more than eight years, following a significant drop last Friday. This is an even larger drop than the Black Monday crash of 1987.
“South Korea has halted all sell orders as markets crash more than 5%. In the United States, the Magnificent 7 stocks have erased nearly $500 billion overnight. With rumors of World War III and civil war across Europe, the markets are expecting an even deeper crash tomorrow”.