Bitcoin Plunges Below $50K, Wiping Out $400 Billion from Crypto Market

The cryptocurrency market experienced a significant downturn today, August 5, with Bitcoin falling below $50,000 for the first time since February.

This decline triggered a widespread sell-off across the crypto market. Consequently, the total market capitalization plummeted by 17%, reaching $1.76 trillion.

Bitcoin Crash and Its Immediate Effects

The sudden price decline caught many traders off guard, triggering massive liquidations in the futures market. Data shows the crypto market saw over $1 billion in liquidations in the past 24 hours, with over $600 million in leveraged long positions liquidated within hours.

JUST IN: $1,000,000,000 liquidated from the cryptocurrency market in the past 24 hours.

- Watcher.Guru (@WatcherGuru) August 5, 2024

This massive liquidation further fueled the market's downward spiral. However, despite this crash, Bitcoin's dominance increased to 56%. This increase suggests that investors invest more money into Bitcoin than other coins.

Meanwhile, altcoins and smaller cryptocurrencies faced even steeper declines. Ethereum wasn't spared from the carnage, as its value plummeted by nearly 20% in just two hours. The price slumped to $2,172 before slightly recovering to around $2,200.

ETH is ataround $2,330, having declined nearly 20% in the past 24 hours. However, while Ethereum's price tumbles, its trading volume is up significantly by 240%.

The total crypto market cap dropped from $2.16 trillion to $1.85 trillion, representing one of the largest three-day wipeouts in almost a year. The sudden crash erased over $310 billion from the market.

Factors Contributing to the Downturn

Several factors likely contributed to this market crash. Renewed fears of a global recession have made investors initiate panic sell-offs.

Also, poor employment data from the United States added to these concerns. Moreover, the sluggish growth of leading tech stocks also played a role. As traditional markets struggle, some investors may be pulling money out of riskier assets like cryptocurrencies.

The Crypto Fear & Greed Index reflected the market's mood. According to this data, it plunged from a Greed" reading of 67 to a Fear" reading of 26 in just a week.

Additionally, the collapse in cryptocurrency prices coincided with a drop in the S&P 500, whichfell by over 4% in the same period.This correlation suggests that broader economic concerns affect both traditional and crypto markets.

Long-term Sustainability Concerns

While the immediate crash dominated headlines, a recent report raised questions about long-term crypto sustainability. Galaxy Research released a study on August 2 focusing on Bitcoin layer-2 networks that aim to improve Bitcoin's scalability and transaction speed.

The report highlighted potential challenges these networks might face in the future.

Analyst Gabe Parker pointed out that costs connected to these networks, specifically rollups," could be problematic. He argued that for these layer-2 solutions to survive, they must generate sufficient revenue from transaction fees.

For the networks to remain viable, users must be willing to pay these fees. If they can't attract enough paying users, these layer-2 solutions might struggle to maintain their operations.

Market Response and Future Outlook

As news of the crash spread, trading volumes spiked across major exchanges. Many investors saw the dip as a buying opportunity, leading to increased activity. However, others remain cautious.

The sudden drop has shaken confidence in the market's stability. BTC's daily chart suggests that the bearish trend might continue if the $50,300 support level breaks.

A break below this level could push BTC down to $38,990. The MACD supports this bearish sentiment. It is below its signal line and displays red histogram lines. The coming days and weeks will be crucial for the crypto market, so traders are advised to be cautious.

The post Bitcoin Plunges Below $50K, Wiping Out $400 Billion from Crypto Market appeared first on The Tech Report.