On August 5, Bitcoin prices suddenly plummeted below $53,000. Within less than two hours, BTC fell 10% from $58,350 to $52,500. Ethereum also experienced a rapid drop from $2,900 to $2,600 within 15 minutes. Almost all tokens in the market were not spared, generally falling by 20%. According to data from CoinGecko, the total market value of cryptocurrencies fell below $2 trillion, with a daily decline of 9.4%.

This “anniversary” level plunge caught many off guard, but a closer look at the market reveals some potential “culprits” behind the decline.

Macroeconomic Factors

Last Friday, macro signals clearly indicated a short-term sell-off. The unexpected lower-than-expected non-farm payroll data released by the U.S. triggered a series of chain reactions on Wall Street. This key economic indicator’s weak performance not only led to a sharp decline in U.S. stocks but also sparked widespread concerns about the U.S. economic outlook.
Additionally, the 10-year U.S. Treasury yield fell by 40 basis points, oil prices plummeted, and the Chicago Board Options Exchange Volatility Index (VIX) soared by 25% on Friday and continued to rise after the market opened on August 5, indicating evident market panic.

These macro indicators altered the crypto market’s expectations, contributing significantly to Bitcoin’s price volatility. Although the Federal Reserve announced it would maintain interest rates and hinted at potential future rate cuts, the market might have already priced in this positive news, failing to alleviate the downward trend. Furthermore, the Bank of England’s rate cut also did not boost market confidence, but instead added to market uncertainty.
In the long term, however, the VIX index is expected to retreat. The Federal Reserve is anticipated to cut rates in September, bringing actual capital inflows, and market concerns will gradually dissipate.

Stock Market

Global stock markets are in panic-driven freefall.
On July 31, the Bank of Japan announced a 15 basis point rate hike, ending years of yen carry trade. When the yen starts to rise, the cost for capital and investors to borrow yen increases, forcing them to sell off some U.S. stocks, including high-risk assets like Bitcoin, to reduce yen debt.
U.S. stock futures collectively tumbled, with Nasdaq 100 futures falling 2.21% and S&P 500 futures falling 1.23%. The Federal Reserve’s meeting and non-farm payroll data continuously pushed the stock market down. Major tech stocks showed slowed growth, and several large companies, including Microsoft and Intel, reported second-quarter earnings below expectations, prompting funds to flow back to smaller, underperforming companies.
The Asian market was also affected by the U.S. stock market, beginning to decline. The Japanese stock market plummeted, with the Topix index triggering a circuit breaker, falling 20% from its July high. The Korean stock market fell more than 8%, triggering a circuit breaker for the first time in four years. The Straits Times Index in Singapore expanded its decline to 3%, the S&P/ASX 200 in Australia fell by 3%, and the Philippine stock index widened its decline to 2%.

The overall sentiment and investor confidence in the U.S. stock market impacted the crypto market. When the U.S. stock market performs strongly, investors might be more willing to invest in risky assets, including Bitcoin. Conversely, when the U.S. stock market is weak or declining, investors may prefer safe-haven assets like gold or Treasury bonds, reducing their demand for cryptocurrencies like Bitcoin.

Sell-Off

Jump Crypto, associated with Jump Trading, is actively liquidating a large amount of cryptocurrency assets. Arthur Hayes stated on social media that, according to traditional financial sources, a “big player” had collapsed and sold all their crypto assets. The community largely speculated that this referred to Jump Crypto. Recently, Jump Crypto’s president Kanav Kariya resigned due to regulatory investigations into the company’s activities. Jump Crypto has been redeeming a $410 million wstETH (120,000 tokens) in batches into ETH and then transferring them to trading platforms. Jump Trading, as a dominant player in the trading market, their sell-off actions increased selling pressure while the market continuously liquidated leverage, leading to a significant decline in the crypto market.

ETFs

Last Friday, Bitcoin spot ETFs saw a net outflow of $237 million, and Ethereum spot ETF flows were neutral. This outflow from Bitcoin spot ETFs, the highest in the past three months, included significant outflows from FBTC (-$104.1 million), ARKB (-$87.7 million), and GBTC (-$45.9 million). Although Ethereum spot ETFs remained relatively stable, they have not yet entered the inflow zone due to the continued outflow from Grayscale’s ETHE, indicating that more inflows are needed. The outflow of funds from spot ETFs further reduced market liquidity, exacerbating the magnitude of this decline.

Although new ETFs may temporarily stifle the cryptocurrency market, they are a necessary evil in the long run.

Election

Harris’s election probability is rising.
According to Polymarket, Harris’s probability of being elected is steadily increasing, gradually approaching Trump’s election probability. Previously, Trump made multiple statements branding himself as a “crypto-friendly” candidate, even attending the Bitcoin conference in Tennessee on July 28, where he declared, “I will ensure that the United States becomes the cryptocurrency capital of the world and a Bitcoin superpower.” Consequently, the entire cryptocurrency market tends to favor Trump’s victory. Even the Democratic Party does not resist cryptocurrencies.

War

Geopolitical tensions in the Middle East are escalating.
Tensions in the Middle East are rising following Israel’s airstrike in Beirut last week, killing Hezbollah commander Fouad Shukur and the assassination of Hamas political leader Ismail Haniyeh in Tehran hours later. The International Crisis Group reported, “Haniyeh’s death has brought the Middle East to its most dangerous moment in years, with a high risk of war escalation, and misjudgment could trigger an uncontrolled conflict…, potentially larger than April.”
History shows that every time a war breaks out, our crypto assets are also hit: on the day of the “special operation” of the Russia-Ukraine war in 2022, Bitcoin fell by as much as 11.3%; on April 14 this year, when Iran launched an airstrike on Israel, Bitcoin fell by 9.8% within two hours. If war breaks out again in the Middle East, will cryptocurrencies also be impacted and decline once more?

Conclusion

The recent plunge in the crypto market is not just an internal adjustment but is influenced by the global financial environment, which increases uncertainty. This has led many investors to be wary of bottom-fishing in such a significant downturn. Whether the crypto market will remain sluggish or rebound strongly in the near future depends not only on its internal factors but also on the recovery of the global macroeconomic environment, making the future outlook more uncertain.
Despite the widespread pessimism in the market due to this crash, in the long run, the crypto market has weathered many black swan events, and this time will surely overcome obstacles and restart the bull market cycle.