Crypto Market in Crisis: Bitcoin and Ether Dive.

Cryptocurrencies experienced a significant downturn on Monday as global markets exhibited risk aversion, resulting in Bitcoin plunging by more than 11% and Ether experiencing its most substantial decline since 2021. At one point, Bitcoin was trading 10% lower at $53,100, following a 13.1% drop the previous week, marking its worst performance since the FTX exchange crisis. Meanwhile, Ether saw a decrease of over 20% before recovering slightly to settle at $2,360. The majority of major cryptocurrencies were deeply in the red amid the market turmoil.

The market volatility can be attributed to the escalating global stock sell-off, which has sparked concerns regarding the economic outlook and the potential overvaluation of investments in artificial intelligence. Moreover, rising geopolitical tensions in the Middle East have further exacerbated investor unease.

Notably, US exchange-traded funds linked to Bitcoin witnessed their largest outflows in three months on August 2, raising questions about the market’s resilience in the face of uncertainties. Additionally, the unwinding of the yen carry trade has impacted digital assets as speculators adjust to higher interest rates in Japan.

Despite these challenges, some experts believe that the prospect of US interest-rate cuts could benefit the crypto market, as it would support economic growth. While Bitcoin and Ether have faced various headwinds in recent months, including political uncertainties and potential oversupply risks, some analysts view the current market correction as a favorable buying opportunity.

In the past 24 hours, approximately $760 million worth of bullish crypto positions using derivatives were liquidated, underscoring the high level of leveraged bets in the market. As investors navigate these turbulent waters, it remains to be seen how the market will react to the ongoing uncertainties and whether crypto assets will regain their footing in the near future.