Widespread price collapse hits cryptocurrencies and panic spreads in the market

Widespread price collapse hits cryptocurrencies and panic spreads in the market
Widespread price collapse hits cryptocurrencies and panic spreads in the market

Bitcoin fell to a one-month low amid a broad pullout of riskier investments in global markets due to concerns about the economic outlook.

The largest digital asset fell more than 4% at one point on Wednesday before trimming part of that decline to trade at $56,318. Most other major cryptocurrencies such as Ether also suffered losses, with the second-largest cryptocurrency by market capitalization falling 5.5% in the last 24 hours to $2,374.

Ripple fell 2.8% to settle at $0.5526 and Cardano 5% to trade at $0.3156. Solana fell 3.2% to $129.4, while Polkadot fell 4.2% to $4.0. Binance Coin fell 4.2% to $511, Litecoin by 1% to trade at $64.9, and ChainLink by 3% to $10.3.

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Alarming economic data
Signs of economic weakness in the US and China have caused investor anxiety, leading to the worst period for global equities since the August 5 decline. This pessimistic mood has spilled over into the cryptocurrency market, with traders now focusing on Friday’s U.S. jobs report for clues on whether a deeper slowdown is on the horizon.

At the start of a busy week of economic data, a report showed that U.S. manufacturing activity contracted in August for a fifth month. The Institute for Supply Management (ISM) manufacturing PMI for August was 47.2 points, while expectations were 47.5 and the previous reading was 46.8 points.

A PMI reading below 50 indicates a contraction in the manufacturing sector, which accounts for 10.3% of the economy.

On the other hand, service activities in China grew less than expected, according to a private survey, raising concerns about the health of the economy. The China Services PMI released by Caixin and S&P Global fell to 51.6 points in August, compared to 52.1 in the previous month.

Bearish bets on crypto

In the options market, demand for hedging against Bitcoin declines has increased, both for the period following the upcoming US jobs data and for the post-presidential election in November, according to Sean McNulty, director of trading at liquidity provider Arbelos Markets.

“We have seen renewed interest in buying bearish options for Bitcoin, especially for contracts following employment data at $55,000 and below,” McNulty said. A prominent position has also been opened for contracts that expire on November 29 at the $35,000 level, he added.

This could be a hedge against the loss of pro-crypto Republican candidate Donald Trump in the race for the White House to Democratic Vice President Kamala Harris, who has yet to clarify her stance on digital assets.

Other signs of caution include a decline in total open interest – or pending contracts – for CME Group’s bitcoin futures to their lowest level since May. Meanwhile, bitcoin exchange-traded funds in the United States recorded the longest series of outflows since June, according to data compiled by Bloomberg.

Market analyst Tony Secamore of IG Australia Pty said the risk balance is tilted towards a possible test of the price range between $52,000 and $50,000.

Bitcoin’s rally this year has faded somewhat since it hit an all-time high of $73,798 in March. The challenge is expected to be in the near seasonal forecast if the historical forecast is correct. Over the five years ending in 2023, the cryptocurrency averaged a decline in September of more than 8%.

Read also :Yen moves away from two-week low amid risk aversion

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