Increasing uncertainty and risk aversion in the global market are having a serious impact on the cryptocurrency market.
Bitcoin and other major cryptocurrencies have experienced significant declines due to turmoil in the US stock market and Japanese bond market. Bitcoin fell by 4.2% in the past 24 hours to $87,900. The decline, which came after hitting the $92,500 level earlier in the day, spooked investors. Ethereum also fell by 7.3% to $2,953.
This decline in cryptocurrencies mirrored the sharp decline in the U.S. stock market. The S&P 500 and Nasdaq indexes fell more than 2%, and the Dow Jones index ended the day down 1.76%.
The performance was the worst for the three major U.S. indexes since October. Cryptocurrency-related stocks were also under pressure. Coinbase stock fell 5.6%, Circle fell 7.5%, and Strategy Inc., the largest institutional Bitcoin holder, fell 7.8%. Bitmine Immersion, known for its Ethereum treasury, also stood out with a 9.4% drop.
Experts say the unwinding of leveraged positions and macroeconomic pressures are contributing factors to the selloff. Vincent Liu, chief investment officer at Cronos Research, said the decline was triggered by an “atmosphere of risk aversion and a chain of liquidations due to deleveraging.” It was revealed that approximately $1.07 billion worth of positions were liquidated in the cryptocurrency market in the past 24 hours, of which $999 million were long positions.
Analysts say trade tensions between the U.S. and the EU, a weak Japanese bond market and reduced demand for U.S. bonds from pension funds are weighing on global risk assets. Peter Chan of Presto Research summed up the recent stock market decline with the theme, “Sell America,” emphasizing that the center of the panic was Japan, not the United States. The sharp decline in Japanese government bonds pushed the 10-year bond yield to its highest rate of increase in years, and the 30-year bond yield to its biggest single-day increase since 2003.
From now on, Japan’s early elections are attracting attention. Chong said the outcome could create a new crisis or force the Bank of Japan to resume monetary expansion.
Andri Fauzan Azima, research director at Bitrue, warned that the $87,000 to $88,000 range is an important support level for Bitcoin, and a break below this level could lead to a new decline towards $85,000. Investors continue to closely monitor Fed signals, leverage in derivatives markets, and institutional capital flows.
*This is not investment advice.