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Bitcoin experienced a significant drop on Monday, falling below $50,000 for the first time since February. The cryptocurrency, which was trading at $53,996.70, had earlier tumbled to $49,111.10 before recovering somewhat. This decline marks a sharp reversal from its peak of $69,982 on July 20.
The drop in bitcoin prices follows a broader market sell-off driven by concerns over a potential recession. The Nasdaq Composite, which has shown a close correlation with bitcoin, entered correction territory, while Japan’s stock market plunged more than 12% on Monday, entering a bear market and marking its worst one-day loss since 1987.
Ether also saw a notable decline, falling 11.44% to $2,432.22, wiping out earlier gains for the year. The downturn in cryptocurrencies affected related stocks as well, with Coinbase and MicroStrategy falling 7% and 9%, respectively.
Analysts point to a weaker-than-expected jobs report and manufacturing data from July as contributing factors to the market’s decline. The report has renewed fears of a recession, leading investors to pull back from risk assets. Yuya Hasegawa, a crypto market analyst at Bitbank, noted that the market’s reaction might be exaggerated given there is no concrete evidence of a recession yet.
Additionally, ongoing concerns include sell pressure from Mt. Gox distributions and shifting political dynamics, particularly the narrowing gap between Donald Trump and Vice President Kamala Harris in election polls. This comes in the wake of President Joe Biden’s withdrawal from the 2024 race.
Bitcoin’s performance in August has been lackluster, with a 17.5% drop so far, putting it below the $55,000 support level. If the trend continues, August could become the worst month for bitcoin since June 2022, when it experienced a 37% decline. Despite a year-to-date gain of 27%, the recent volatility has cast doubt on bitcoin’s effectiveness as a hedge against economic uncertainty.
Hasegawa remarked that while bitcoin does serve as a hedge against fiat currency, it remains a high-risk asset that investors tend to sell off during times of market instability.