Bitcoin Plummets Amid Wider Market Selloff

5 Aug 2024

Forbes

Topline

Cryptocurrencies bitcoin and ethereum took a tumble on Monday, dropping to near-six-month lows and ending months of gains as investors once again turn away from the crypto market—and as stocks fall amid renewed fears of a recession.

The price of Bitcoin hit its lowest mark since February, reversing months of gains.

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Bitcoin fell to a daily low of $49,443 Monday morning, a 15% drop and its lowest point since late February, before rising narrowly to just over $53,800.

Competing cryptocurrencies also tumbled Monday morning: Ethereum fell over 11% to just over $2,386, a six-month low, while dogecoin fell over 10% to a six-month low just below 10 cents.

Bitcoin has been hit hard by investor outflows over the past week, with the cryptocurrency seeing $400 million in outflows in the week ending Aug. 3, following five straight weeks of gains, according to data from CoinShares—Ethereum lost $146 million in that same period.

The drop also coincides with a plunge on Wall Street: Dow Jones dropped over 2.5% on Monday—its worst loss by percentage since September 2022—to a two-month low, while the tech-heavy Nasdaq fell nearly 3% on the day and the S&P 500 fell 3%, even as the Federal Reserve indicates interest rate reductions are in store.

That downturn was led by a group of tech giants that saw major losses on the morning, with Apple shares opening down 8%, along with Nvidia (14%), Amazon (8%), Meta (7%) and Google parent company Alphabet (6%), which all saw a decline on the heels of a disappointing jobs report on Friday with unemployment hitting a near-three-year high.

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Contra

Monday’s drop marks a complete turnaround from bitcoin’s record high of $69,000 from March, the culmination of a months-long rally fueled by a drive in spot bitcoin exchange-traded funds (ETF). The Securities and Exchange Commission had approved ETFs from a group of firms—including BlackRock and Fidelity—opening the door for ETF trading in a historic move that expands bitcoin investment for a wider audience.

Tangent

Bitcoin was created in 2008 as a decentralized alternative to national currencies, though it did not take off until 2017, reaching the $10,000 mark for the first time. After spiking during the first year of the COVID-19, the crypto giant was hit hard again in 2022 amid stubbornly high inflation, fears of a looming recession, spooking investors of the possibility of a dreaded so-called crypto winter. In August 2022, bitcoin dropped below $20,000, coinciding with the Federal Reserve’s repeated interest rate hikes designed to combat rising inflation. The price of bitcoin fell again in December 2022, hitting a near-two-year-low. Adding insult to injury was the collapse of Sam Bankman-Fried’s crypto exchange FTX (Bankman-Fried was sentenced to 25 years in March on a fraud and conspiracy conviction over a scheme to divert FTX customer funds—he appealed that conviction in April).