Bitcoin and Ether Dive to Multi-Month Lows Amid Recession Fears

Bitcoin and Ether Dive to Multi-Month Lows Amid Recession Fears

On August 5, 2024, Bitcoin and Ether plummeted to their lowest levels in several months, driven by mounting concerns over a potential U.S. recession following weak economic data. This sharp decline marks a dramatic turnaround from just days earlier, when optimism sparked by a speech from Republican presidential candidate Donald Trump had pushed Bitcoin above the $70,000 threshold for the first time in over a month.

The cryptocurrency market had earlier received a boost this year after the U.S. Securities and Exchange Commission approved exchange-traded funds (ETFs) that track the spot prices of Bitcoin and Ether. However, recent downturns in these digital currencies mirror declines in global equities, as fears of an impending U.S. recession and rising geopolitical tensions weigh heavily on investor sentiment.

Since reaching a record high in March, Bitcoin has lost more than a third of its value. The increasing correlation with equities has also eroded its reputation as a safe-haven asset. According to Tony Sycamore, a market analyst at IG, "It's a big reminder that Bitcoin and crypto in general are risk assets and sit at the pointy end of the risk spectrum."

On Monday, Bitcoin dropped 12% to $52,054, approaching its largest single-day decline since November 2022. Ether fell as much as 21%, reaching its lowest level since January. Sycamore noted that Bitcoin is currently testing support in the $54,000/$53,000 range and must hold at this level to avoid further decline towards $48,000.

In addition to the cryptocurrency plunge, shares of U.S. crypto-related stocks also experienced significant drops before the market opened on Monday. Companies like CleanSpark, Bitfarms, Riot Platforms, and Marathon Digital saw their stocks fall between 12% and 18%. Coinbase’s shares dropped by 10%, and MicroStrategy, a major Bitcoin investor, saw a nearly 15% decline in its stock value.

The turbulence in both the crypto and related stock markets highlights the broad impact of economic uncertainties and investor sentiment shifts.

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