Global risk aversion heats up, crypto market takes a hit: Bitcoin falls below $50,000, ETFs plunge over 25%

Global risk aversion heats up, crypto market takes a hit: Bitcoin falls below $50,000, ETFs plunge over 25%On August 5th, the cryptocurrency market experienced a severe downturn, with Bitcoin prices falling below the $50,000 mark, hitting a new low since February of this year. Driven by global risk aversion, Bitcoin prices plunged by 12

Global risk aversion heats up, crypto market takes a hit: Bitcoin falls below $50,000, ETFs plunge over 25%

On August 5th, the cryptocurrency market experienced a severe downturn, with Bitcoin prices falling below the $50,000 mark, hitting a new low since February of this year. Driven by global risk aversion, Bitcoin prices plunged by 12.86% in the past 24 hours, and by 2.79% in the past week. Other major cryptocurrencies also declined, with Ethereum falling below $3,000 and Binance Coin dropping by over 15%.

A surge of funds flowed into the stablecoin USDT seeking safe haven, with USDT trading volume reaching $741.34 billion in the past 24 hours. Meanwhile, the volatile price swings triggered significant liquidations in the market. According to data from coinglass, the past 24 hours saw 279,300 liquidations with a total value of $1.068 billion.

The decline in cryptocurrencies also resulted in a downturn for related ETFs. Bitcoin ETFs in the US market experienced widespread price drops, with a net outflow of $237 million on August 2nd. Ethereum spot ETFs also saw net outflows, with $54.3 million withdrawn on the same day. ETFs in the Hong Kong market plummeted on August 5th, with Bosera Ethereum, Huaxia Ethereum, and GF Ethereum ETFs diving by more than 25%, while GF Bitcoin and Huaxia Bitcoin fell more than 17%, and Bosera Bitcoin plummeted nearly 15%, recording the largest drop since their listings. Their prices also reached their lowest points since their debuts.

The recent decline in the cryptocurrency market is closely linked to the growing risk aversion sentiment across global assets. Last week, the three major US stock indices closed in the red, with the Nasdaq down 2.43%, the S&P 500 down 1.84%, and the Dow Jones down 1.51%. Asian markets also experienced a "Black Monday." On August 5th, the Nikkei 225 index closed with a hefty 12.4% drop, reaching 31,458.42 points, erasing all gains made this year. The Nikkei 225 futures were halted twice during the day due to circuit breakers. The Korean KOSPI index and the KOSDAQ index both plunged by 8% before triggering circuit breakers, suspending trading for 20 minutes.

The primary driver of this market sentiment is the release of several disappointing US economic data points. The latest data revealed that the US ISM Manufacturing PMI in July stood at 46.8, a new low since November 2023, below both expectations and the previous reading. US non-farm payrolls in July fell sharply to 114,000 from the previous reading of 179,000, significantly below expectations. The unemployment rate rose to 4.3%, reaching its highest level in three years. The Federal Reserve's latest rate decision opted to keep rates unchanged for the eighth consecutive time. The market perceives the Fed's rate cuts to be too slow, increasing the risk of a US economic hard landing and triggering widespread risk aversion.

The "Seven Giants" of US tech stocks mostly declined, with Amazon, Tesla, Microsoft, and Google experiencing four consecutive weeks of losses. Amazon and Nvidia lost approximately trillions of dollars in market cap.

The cryptocurrency market is facing multiple challenges, including uncertainty about the global economic outlook, tightening regulatory policies, and waning investor confidence, all of which are negatively impacting the market. The future direction and trajectory of the cryptocurrency market remain uncertain. Investors need to proceed with caution and implement strong risk management strategies.

Here are some additional points to consider:

- Safe-haven properties of cryptocurrencies: Cryptocurrencies were once considered to possess safe-haven qualities. However, with the recent global economic instability, these properties have been challenged.

- Safe haven function of USDT: As a stablecoin pegged to the US dollar, USDT serves as a safe haven for investors seeking to protect their funds during market volatility.

- Investment risks associated with ETFs: Investing in ETFs involves certain risks. Investors need to be aware of appropriate risk management measures.

- The impact of market sentiment: Market sentiment can significantly influence the cryptocurrency market. Investors should closely monitor sentiment shifts.

- The importance of risk management: Investing in cryptocurrencies entails inherent risks. Investors should prioritize risk management to mitigate potential losses.

Please note that the above information is for reference only and does not constitute investment advice. Investors should exercise their own judgement based on their individual circumstances and implement appropriate risk management practices.