Is Bitcoin in a Winter? Weekly Drop Exceeds 13%, Largest Since FTX Collapse

Is Bitcoin in a Winter? Weekly Drop Exceeds 13%, Largest Since FTX CollapseGlobal risk aversion has swept through markets, and Bitcoin, the largest digital asset, has not been spared, suffering its largest weekly decline since the collapse of cryptocurrency exchange FTX in 2022.On August 5th, Bitcoin's price fell by more than 10%, before narrowing its losses, trading at $54,135

Is Bitcoin in a Winter? Weekly Drop Exceeds 13%, Largest Since FTX Collapse

Global risk aversion has swept through markets, and Bitcoin, the largest digital asset, has not been spared, suffering its largest weekly decline since the collapse of cryptocurrency exchange FTX in 2022.

On August 5th, Bitcoin's price fell by more than 10%, before narrowing its losses, trading at $54,135.5 at the time of publication. Over the past seven days (August 4th), Bitcoin has fallen by a cumulative 13.1%, marking its largest decline since FTX's bankruptcy. Other smaller cryptocurrencies, such as Ethereum and Dogecoin, have also experienced significant losses.

Bitcoin reached an all-time high of $73,798 in March this year but has been under pressure from a series of factors, leading to a persistent downtrend.

Political Uncertainty

The two frontrunners in the US presidential election, pro-crypto Republican Donald Trump and Democratic challenger Vice President Kamala Harris, have clashed on cryptocurrency policy. Harris has not yet held any crypto assets and has not explicitly expressed her policy stance on digital assets, raising concerns about future policy direction in the market.

Potential Over-supply Risk

The market is also concerned that government-held Bitcoin might be sold, and tokens returned to creditors through bankruptcy proceedings could lead to an oversupply in the cryptocurrency market.

Technical Charts Suggest Further Correction

On August 2nd, the US Bitcoin exchange-traded fund (ETF) also experienced its largest outflows in about three months, breaking below its 200-day moving average. Tony Sycamore, a market analyst at IG Australia Pty, believes that technical charts suggest Bitcoin may see further corrections down to $54,000.

Global Stock Market Sell-off Amplifies Concerns

Bitcoin's decline coincides with an intensified global stock market sell-off. Investors are concerned about the economic outlook and are beginning to question whether massive investments in artificial intelligence can deliver on the hype surrounding the technology. Furthermore, geopolitical tensions in the Middle East have also heightened investor anxiety.

Less Restrictive Monetary Policy Could Benefit Cryptocurrencies

Sean Farrell, head of digital asset strategy at Fundstrat Global Advisors LLC, believes that "the recent turmoil in traditional markets has increased the likelihood of an earlier-than-expected easing of restrictive monetary policy, which would be a positive development for cryptocurrencies."

Bitcoin's Gains Slow This Year

Bitcoin's gains have slowed to around 25% this year, compared to an 18% rise in gold prices and a 9% increase in global stock market indexes.

Conclusion

Bitcoin's recent sharp decline reflects rising risk aversion in global markets. Political uncertainty, potential oversupply risks, technical charts suggesting further corrections, and a global stock market sell-off are all contributing to market concerns. However, some analysts believe that a less restrictive monetary policy could benefit cryptocurrencies. Overall, the outlook for Bitcoin remains uncertain, and investors should closely monitor market developments.