Bitcoin (BTC), Ether (ETH) suffer worst weekly drop since FTX crash
Crypto investors faced one of the most challenging weeks in recent memory, with a massive wave of selling wiping out billions of dollars from digital asset markets. Bitcoin plummeted by 17.3% this week, while ether saw a 22% drop, marking their largest weekly declines since November 2022 when the collapse of FTX exchange triggered a market-wide panic.
Despite a slight recovery on Saturday, both assets remained close to their lows, with Bitcoin trading just above $60,000 and Ether around $1,550. The broader digital asset market also took a hit, losing approximately $390 billion in value throughout the week, bringing the total market capitalization to just above $2 trillion, significantly down from its peak of nearly $4.2 trillion in October.
The damage was not limited to prices alone, as crypto derivatives traders experienced significant losses. Around $7 billion in leveraged positions were liquidated across digital assets during the week, with Monday and Friday witnessing the most severe sell-offs. Long positions, representing bullish bets on higher prices, accounted for approximately $5.7 billion of the total liquidations.
Several bearish factors contributed to the market crash. Strategy, the largest corporate holder of Bitcoin, disclosed its first sale of BTC in nearly four years, raising concerns about additional potential sales to cover obligations related to preferred equities. Bitcoin ETFs also experienced outflows as capital rotated away from crypto assets towards AI investments.
The surge in AI-related stocks and anticipation of IPOs from companies like OpenAI and SpaceX led investors to reconsider the opportunity cost of holding Bitcoin. Additionally, concerns about AI exposing vulnerabilities in crypto protocols, such as the recent discovery of a critical flaw in Zcash’s privacy system using AI, added to the selling pressure.
Friday’s robust U.S. jobs report further exacerbated the situation, prompting speculation about the Federal Reserve’s future actions. Rising U.S. Treasury bond yields and fears of potential rate hikes if inflation remains high affected both traditional and crypto markets.
As traditional markets closed for the weekend and crypto prices stabilized on Saturday, the selling pressure eased temporarily. The future trajectory of the market will depend on broader macroeconomic factors like bond yields, rate hike expectations, and competition from AI investments and IPOs. Whether this week’s downturn signals a market bottom or is part of a continuing downtrend remains to be seen.
