Cryptocurrency prices are plummeting to a level not seen since 2022, when the collapse of major companies like FTX and Terraform Labs put the entire industry in jeopardy. This time around, with major digital assets like Bitcoin and Ethereum falling as much as 25% in a single day, the reasons for the plunge are more complex.
Blockchain proponents have long argued that cryptocurrencies offer a hedge to traditional financial assets. But the price drop reflects a broader stock market decline triggered by a disappointing jobs report and slow action by the Federal Reserve. With bitcoin hovering around $50,000 (a price it hasn’t reached since February, after spending most of July above $65,000), the turmoil may be just beginning.
Cryptocurrency Prices Drop
On Sunday and Monday morning, Bitcoin’s price fell below $50,000, a key psychological indicator of investor confidence in the broader cryptocurrency market, and down more than 20% from the previous week. Meanwhile, other tokens like Ethereum and Solana have seen declines of more than 30% over seven days. By midday Monday, cryptocurrency prices had made a modest comeback, with Bitcoin trading around $53,000.
The cryptocurrency crash has coincided with broader setbacks for the U.S. economy. After humming along for much of July, stocks tumbled last week after new data from the U.S. Labor Department showed hiring slowed while the unemployment rate missed expectations, hitting its highest level in nearly three years. The Dow Jones Industry Average fell more than 600 points as traders were dismayed by the Federal Reserve’s decision in July to keep its benchmark interest rate unchanged. While a long-awaited rate cut is likely in September, fears are growing on Wall Street that the action may come too late.
Despite recent bullish news for the cryptocurrency sector, including the July launch of Ethereum ETFs in the United States, digital assets have fallen alongside the stock market, with the total cryptocurrency market cap falling from over $2.5 trillion on July 28 to around $1.9 trillion at press time, reflecting the worst loss since 2022. According to blockchain financial services firm CoinShares, digital asset investment products saw outflows for the first time in four weeks totaling over $500 million.
A report from Wintermute, a major cryptocurrency market maker, on Monday described the jobs report-led drop in cryptocurrencies as “unexpected,” noting that more than $1 billion in digital asset positions were liquidated overnight, alongside a $57 billion drop in the market capitalization of altcoins.
While macroeconomic conditions are the primary factor behind the collapse, Wintermute pointed to other factors, including a recent liquidation of Jump Trading, a Chicago-based proprietary trading firm that had become a central player in the cryptocurrency industry over the past decade before exiting the sector amid a series of collapses and regulatory scrutiny. On-chain data showed that Jump moved $47 million worth of Ethereum onto centralized exchanges, though Wintermute’s analysis cautioned that attributing a broader market move to Jump is a “stretched narrative putting a story over price action.”
According to the firm, volatility is increasing as traders seek to hedge uncertainty, with options contract prices rising and trading volume focusing on large-cap assets like Bitcoin, Ethereum and Solana.
