After days of uncertainty and persistent bearish conditions, the cryptocurrency market has finally taken a significant hit, characterized by substantial capital outflow amid dwindling investor confidence.
The sell-off has seen the overall crypto market cap drop to $1.81 trillion as of press time on August 5. Notably, this valuation reflects an outflow of about $340 billion, considering the total market cap stood at $2.15 trillion just 24 hours ago.
Crypto market 24-hour market capitalization chart. Source: CoinMarketCap
Although Bitcoin (BTC) is one of the most affected cryptocurrencies, other digital assets account for a major share of the capital outflow. For instance, excluding Bitcoin, many other cryptocurrencies have seen their market cap drop by almost 10% in the last 24 hours, reflecting an $89.46 billion wipeout.
Total crypto market cap chart excluding Bitcoin. Source: TradingView
Bitcoin leads market sell-off
With investors rattled, Bitcoin faces an uphill task of maintaining its price above the $50,000 support zone. By press time, the maiden crypto was trading at $52,355, reflecting losses of about 13% on the daily chart, while the weekly timeframe shows BTC is down almost 25%.
One-week Bitcoin price chart. Source: Finbold
Besides Bitcoin, altcoins have also suffered notable losses, with Ethereum (ETH) plunging 19% to trade at $2,350. Solana (SOL), valued at $121 at the time of writing, recorded a 14% drop on the 24-hour chart. Meanwhile, XRP lost the critical support of $0.50, dropping by 14% to trade at $0.47 by press time.
Why the crypto market is plunging
Investors have been rattled by growing fears of a recession hitting the United States. The sell-off also impacted equities markets, partly due to disappointing earnings, a weaker-than-expected jobs report, higher unemployment, and a declining manufacturing sector. These elements are further compounded by escalating geopolitical tensions, adding uncertainty to risk assets.
Notably, the ongoing plunge in crypto has also coincided with a broader slide in equities in Asia-Pacific markets. Specifically, Japan’s Nikkei 225 dropped as much as 7%, extending losses from last week after the Bank of Japan announced it would hike its benchmark interest rate to the highest level in 16 years.
Additionally, there are concerns that Mt. Gox payout beneficiaries are adding extra pressure on the markets by selling their Bitcoin, increasing supply, and contributing to the downward pressure on prices.
In the meantime, the focus is on the Federal Reserve’s next monetary policy, as the institution’s decision will likely have a major impact on the economy’s trajectory.
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