On August 5, the crypto market experienced a significant downturn, with Bitcoin (BTC) dropping 10% from $58,350 to $52,500 in less than two hours.
At the time of writing, BTC has climbed back to the $54,000 level, but it still marks an 11% decline in the past 24 hours.
This sudden drop marks the first time BTC has traded below $55,000 since February. Similarly, Ether (ETH) also plunged, dropping 21% to a low of $2,291.
CoinGlass data shows that traders liquidated 208,200 positions with a cumulative total value of over $800 million, equivalent to IDR 12.8 trillion, with 90% being long positions.
Causes of Bitcoin Price Drop
Analysts attribute the sharp decline in Bitcoin prices to a combination of macroeconomic uncertainty and geopolitical tensions.
Analysts point to the US elections, interest rate fluctuations, and escalating geopolitical tensions in the Middle East as major drivers of market volatility.
According to Decrypt, Rich Rosenblum, co-founder of trading firm GSR, stated that these factors collectively have caused a surge in market liquidations.
He said, “If a macro or geopolitical collapse similar to March 2020 occurs, we tend to see crypto bear the brunt, as this is not a high-conviction play for most ‘tourists’ who entered the market last year.”
Macroeconomic updates, such as lower-than-expected payroll figures and significant stock movements, added pressure on the market. Additionally, the movement of hundreds of millions of dollars in crypto assets by Jump Crypto amid a CFTC investigation further frightened investors.
The US presidential election also adds to the uncertainty, with Vice President Kamala Harris leading the polls against pro-crypto Donald Trump, raising concerns about future crypto policies.
This decline also coincides with a sharp sell-off in the Japanese stock market, with the Nikkei 225 index falling by 7.1%. This was due to the Bank of Japan’s decision to raise interest rates.
Buying Opportunities According to Analysts
Despite the market downturn, some analysts see this as a potential buying opportunity. Ryan McMillin, chief investment officer at Merkle Tree Capital, noted that investors can view Bitcoin’s current price as the bottom of its five-month range, presenting favorable buying conditions.
Rich Rosenblum added that increased money printing in response to economic challenges could make Bitcoin more attractive to investors.
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Read: Bitcoin Price Could Reach $100,000 by End of 2024 (dinodapps.com)
