Bitcoin, the original cryptocurrency, experienced a significant drop, plunging over 10% at one point before recovering slightly to trade at $54,333 as of 9:17 a.m. in Singapore on Monday. This decline marks the largest weekly loss since the FTX exchange collapse in 2022, with Bitcoin losing 13.1% over the past seven days.
The broader cryptocurrency market is also suffering, with smaller tokens like Ether and Dogecoin incurring heavy losses. This downturn coincides with a global stock selloff driven by concerns about the economic outlook and doubts about the sustainability of heavy investments in artificial intelligence. Geopolitical tensions in the Middle East are further exacerbating investor anxiety.
Bitcoin exchange-traded funds (ETFs) in the US experienced their largest outflows in three months on August 2. Additionally, Bitcoin has fallen below its 200-day moving average, a technical indicator suggesting the potential for a deeper pullback towards $54,000, according to Tony Sycamore, a market analyst at IG Australia Pty.
Since hitting a record high of $73,798 in March, Bitcoin has faced numerous challenges, including shifting political landscapes in the US. The upcoming presidential race between pro-crypto Republican Donald Trump and Democratic Vice President Kamala Harris, who has yet to articulate a clear digital-asset policy, adds to market uncertainty.
Other concerns include potential Bitcoin sales by governments and the risk of a supply overhang from tokens returned to creditors through bankruptcy proceedings. However, there is a silver lining: bond traders are betting on US interest-rate cuts beginning in September to support economic growth, which could positively impact the cryptocurrency market, according to Sean Farrell, head of digital-asset strategy at Fundstrat Global Advisors LLC.
Despite recent volatility, Bitcoin’s year-to-date gain stands at approximately 25%, outperforming gold’s 18% rise and a 9% increase in a global stock index.