With Sudden Plunge, When Will the Market Rebound?

2024-08-07, 08:17

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![](https://gimg2.gateimg.com/image/article/17230183911692587449analysis.jpeg)
## [TL；DR]: 
Since last week, the price of <a href="/fr/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> has continuously fallen below the $60,000 and $50,000 levels, experiencing a sharp decline and breaking the lowest record since March of this year.

The correlation between Bitcoin and traditional financial markets is increasing, triggered by a massive sell-off and a series of liquidations.

The holdings of Bitcoin futures contracts across the entire network have dropped to $25.8 billion, and the funding rates have significantly turned negative. A large number of leveraged long positions have been liquidated. According to past patterns, this may indicate that the fastest stage of market decline is approaching its end.

## Introduction
This week, a plunge of 805, comparable to 312 and 519, suddenly hit. With panic spreading and a series of liquidations, the <a href="/fr/price" target="_blank" class="blog_inner_link">crypto market</a> experienced a significant drop. This article will explain the truth behind this sharp drop and provide an outlook for its future direction.
 
## Big Drop+Sharp Drop, Ethereum Drops 20% in 1 Hour
The recent sharp decline in the crypto market has triggered widespread pessimism.

Since last week, the price of Bitcoin has continuously fallen below the $60,000 and $50,000 levels, experiencing a sharp decline and breaking the lowest record since March of this year.
![](https://gimg2.gateimg.com/image/article/17230184361.jpg)
Source: Gate.io
 
Meanwhile, <a href="/fr/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> has not been spared, and its performance has even weakened. After falling below the support level of $3,000, it plummeted to a low of $2,111, with a staggering 20% drop in just one hour on Monday morning, almost offsetting all of its accumulated gains over the year.

In addition, many altcoins have also experienced a decline of around 20%.
 ![](https://gimg2.gateimg.com/image/article/17230184602.jpg)
Source: Gate.io
 
According to Coinpass data, in the rapidly declining market that has hit its lowest price so far, the entire network has experienced a stock explosion of $139 million within an hour, with multiple orders experiencing a stock explosion of $131 million, short orders experiencing a stock explosion of $8.0981 million, BTC experiencing a stock explosion of $72.4462 million, ETH experiencing a stock explosion of $22.076 million, and SOL experiencing a stock explosion of $5.5766 million. In the past 24 hours, the entire network has experienced a stock explosion of $1.02 billion, with multiple orders experiencing a stock explosion of $889 million.
 ![](https://gimg2.gateimg.com/image/article/17230184743.jpg)
Source: coinglass
 
This turbulence has also affected the blockchain sector in the US stock market. After the opening on Monday, MicroStrategy (MSTR O) Fell over 23%, Canaan Technology (CAN. O) fell over 21%, Coinbase (COIN. O) O) Fell over 18%, and Riot Platforms (RIOT O) Fell by over 11%.
 
## Under the Macroeconomic Turbulence, a Series of Liquidations led to a Sharp Decline
Recently, the global financial market has been continuously hit hard by multiple unfavorable factors, including the weak performance of US employment and economic data, the abnormal rise of the Japanese yen exchange rate, and the escalation of geopolitical tensions in the Middle East.

The combined effect of these negative factors has significantly declined global investors' confidence leading to further declines in the stock and bond markets. At the same time, the correlation between Bitcoin and traditional financial markets is increasing, triggered by a massive sell-off and a series of liquidations.

**The signs of economic recession in the United States are intensifying, and financial deleveraging is accelerating**

From the recent reactions of global financial markets, people's short-term fear of economic recession has dominated, exceeding expectations of global central bank interest rate cuts.

Last week, the nonfarm payroll data released by the United States was significantly lower than expected, especially with the unemployment rate soaring to 4.3%. This data is not only weaker than the market's expected 175,000 job growth but also triggered the "Sam's Law," which has historically accurately predicted economic recession in the United States and currently meets its recession warning conditions. This signal has intensified market concerns that the US economy may have fallen into recession.
 ![](https://gimg2.gateimg.com/image/article/17230185134.jpg)
Source: Wind, China Securities Research Center
 
Although Federal Reserve Chairman Powell hinted at a possible future rate cut at the end of July meeting, he did not take immediate action and instead postponed his expectations until September. However, the weak employment data quickly confirmed the market's concerns about an economic slowdown, causing a heavy blow to the US stock market and global markets. Investor confidence was also dampened, and risky assets such as cryptocurrencies were sold off.

In addition, closing yen arbitrage trades may also have impacted the market. Recently, many financial market participants have borrowed Japanese yen to invest in high-yield assets, which is reversing their position. In deleveraging the financial system, Bitcoin, an emerging asset, is naturally under pressure due to the withdrawal of funds.

**Mt. Gox, Jump Crypto, and US Government Sell-off Hit**

According to QCP Capital, the recent decline is also driven by the panic caused by heavy selling expectations, as well as selling pressure from the US government (approximately 28,000 BTC), Mt. Gox (33,960 BTC), and Genesis ($1.5 billion worth of BTC and ETH).

Mt.Gox also transferred a large amount of BTC at the end of July but still holds a considerable amount of BTC. Similarly, the US government has been frequently transferring BTC since late July, which has become a huge selling pressure on high-hanging bulls.
 ![](https://gimg2.gateimg.com/image/article/17230185515.jpg)
Source: ARKHAM

Meanwhile, perhaps due to the US Commodity Futures Trading Commission (CFTC) investigation of Jump Crypto, Jump Crypto has been continuously selling ETH. In addition, market makers such as Wintermute, <a href="/fr/price/flow-flow" target="_blank" class="blog_inner_link">Flow</a> Traders, GSR Markets, Amber Group, etc., have cumulatively transferred over 130,000 ETH to CEX in the past two days.

**Serial liquidation leads to a spiral decline**

A series of liquidations inevitably aid every market crash. According to on-chain analyst Yu Jin's monitoring, ETH fell sharply on Monday morning, causing some leveraged ETH whales to be liquidated, further driving ETH prices down by more than 20%.
 ![](https://gimg2.gateimg.com/image/article/17230185756.jpg)
Source: @EmberCN
 
In fact, within the most severe 24 hours of this round of decline, the on-chain lending and clearing volume exceeded $320 million, setting a new high for the year. Among them, the ETH collateral clearing volume, which experienced a huge decline in this round, reached $187 million, undoubtedly driving the coin price further down.
 
## The Market has Rebounded Slightly, Will the Bulls Still Come?
As of the writing date, Bitcoin's value has dropped significantly by 30% in the past week, and Ethereum's has dropped by 40%. This reminds people of the pessimistic market crashes in March 2020 and May 2021. These similar declines often occur in bull markets, and after deep adjustments, the market quickly recovers.

However, the current position of Bitcoin futures contracts on the entire network has dropped to $25.8 billion, a decrease of over 30%. The funding rate has significantly turned negative, and many leveraged long positions have been liquidated. The market trading volume has increased significantly. According to past patterns, this may indicate that the fastest stage of market decline is approaching its end.

Several industry insiders have expressed their opinions on this sharp market decline. Arthur Cheong, founder of DeFinance Capital, pointed out that the current crypto crash is remarkably similar to the situation in March 2020. Both were driven by fluctuations in the macro-financial environment, and entering a period of low liquidity in the coming weeks is also an excellent opportunity to enter.
 ![](https://gimg2.gateimg.com/image/article/17230186067.jpg)
Source: @Arthur_<a href="/fr/price/0x-zrx" target="_blank" class="blog_inner_link">0x</a>
 
Bitwise's CIO Matt Hougan also cited the example of Bitcoin's rebound after the2020 market crash emphasizing that last weekend's sell-off could be a buying opportunity. He also stated that as a highly volatile asset, significant price fluctuations in Bitcoin are the norm, which will continue for some time.

From the above, it is not difficult to see that pessimistic market sentiment is spreading both inside and outside the crypto market. This decline further highlights the close connection and mutual influence between global financial markets. However, with the end of the long liquidation wave, Bitcoin is approaching its closing price. It is believed that with the easing of panic and the end of selling pressure, the market will gradually recover from this round of sharp decline. Investors should also remain cautious again from the recent violent fluctuations, control high-leverage trading, and better cope with market uncertainty risks.

<div class="blog-details-info">
<div>Author:**Carl Y.**, Gate.io Researcher
<div>Translator:Joy Z.
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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