Bitcoin drops below US$59000 after worst week since FTX collapse

BITCOIN is under pressure from a bout of risk aversion in global markets that saddled the largest digital asset with its heftiest weekly loss since the collapse of the FTX exchange in 2022.

The original cryptocurrency sank more than 10 per cent at one point before paring some of the decline to trade at US$54,333 as at 9.17 am in Singapore on Monday (Aug 5). The token lost 13.1 per cent in the seven days to Sunday, the most since the period of FTX’s bankruptcy. Smaller tokens such as Ether and meme-crowd favourite Dogecoin also nursed heavy losses.

The declines come as a global stock sell-off intensifies, reflecting concerns about the economic outlook and questions over whether heavy investment into artificial intelligence will live up to the hype surrounding the technology. Geopolitical tension is rising in the Middle East, adding to investor skittishness.

Bitcoin exchange-traded funds in the US suffered their largest outflows in about three months on Aug 2. The digital asset has also tumbled to its 200-day moving average price.

The latter technical chart pattern “opens the way for a deeper pullback” towards US$54,000, Tony Sycamore, market analyst at IG Australia, said.

Bitcoin has been buffeted by a range of factors since hitting a record of US$73,798 in March, including shifting political fortunes in the US as pro-crypto Republican Donald Trump and Democratic opponent Vice-President Kamala Harris – who has yet to detail a digital-asset policy stance – lock horns in the presidential race.

Also hanging over the market are possible sales of Bitcoin seized by governments and the risk of a supply overhang from tokens returned to creditors through bankruptcy proceedings.

Bond traders have amplified bets on US interest-rate cuts beginning in September to support economic expansion. The recent upheaval in traditional markets “increases the likelihood of less restrictive monetary policy coming sooner rather than later – a good thing for crypto”, argued Sean Farrell, head of digital-asset strategy at Fundstrat Global Advisors.

Bitcoin’s year-to-date advance has moderated to approximately 25 per cent, compared with an 18 per cent climb in gold and a 9 per cent jump in a gauge of global stocks. BLOOMBERG