Bitcoin has once again staged a major battle royale.
On the morning of August 5th, in less than two hours, the price of Bitcoin plummeted 10% from around $58300 to around $52500. In the afternoon, Bitcoin continued to fall and fell below $50000. As of press time, the latest price of Bitcoin is $50870.2, a decrease of 16.3% within 24 hours.
Other cryptocurrencies such as Ethereum and SOL have not been spared and have experienced declines one after another. According to Coinglass data, over 270000 people have been liquidated in the past 24 hours, with a total liquidation amount of 1.028 billion US dollars. According to data from Alternative. me, the cryptocurrency fear and greed index has fallen back to a state of 'fear'.
For investors, it is important to keep in mind that digital assets are high-risk investment assets, and the magnitude and speed of asset price fluctuations are significantly different from traditional assets. The underlying equity mechanisms and technological support are also significantly different from traditional investment assets, "Uweb President and Co Chairman of the Blockchain Committee of the China Communications Industry Association, Yu Jianing, told reporters from Huaxia Times.
Bitcoin's Great Diving
Over the past week, the cryptocurrency market has experienced its largest decline in nearly a year. Bitcoin fell from $70000 to $50000, and Ethereum fell from $3300 to $2100.
According to CoinGecko data, the total market value of the cryptocurrency market briefly fell below $1.9 trillion on the afternoon of August 5th, with a 24-hour decline of over 16%. Since reaching a peak of $2.77 trillion in total market value in March this year, the decline has exceeded 30%.
Since August, the US stock market has experienced a series of significant corrections, and the warning of an economic recession has triggered market panic. Previously, the non farm payroll in the United States increased by 114000 people in July, the lowest record since December 2020. The stacked unemployment rate has risen to 4.3%, deepening people's concerns about a potential economic recession. The market generally believes that the Fed's interest rate cut is "too late".
Yu Jianing stated that after the release of non farm payroll data, US stock futures collectively fell and affected global markets, with Asian stock markets also experiencing significant declines. This global market volatility reflects the direct impact of economic data and the widespread concerns of investors about the future economic outlook. In this situation, the digital asset market, as a high-risk asset, is inevitably affected and its price drops significantly.
The recession panic of the global economy and the poor performance of the US stock market have intensified the market's risk aversion, leading to the withdrawal of funds from high-risk assets. Wang Peng, an associate researcher at the Beijing Academy of Social Sciences, also told reporters from the Huaxia Times that the expectation of the Federal Reserve raising interest rates has once again become the focus of market discussions, and the tightening monetary policy has had a significant impact on high-risk assets. In addition, the regulatory situation for cryptocurrencies worldwide is becoming increasingly severe, with countries such as China, Europe, and India implementing restrictive measures.
Markus Thielen, an analyst at 10x Research, pointed out that the Federal Reserve's suggestion to cut interest rates in the fall cannot prevent an economic downturn. If the stock market follows the downward trend of the ISM manufacturing index and even begins to anticipate an upcoming recession, then stocks may experience a significant decline in the coming quarters. If this happens, Bitcoin may suffer a significant sell-off, with its price falling below $50000 or even lower.
Another reason for the decline comes from selling pressure from the US government, Mt. Gox, and Genesis. On July 31st, Mount Mentougou The Gox address transferred 34000 bitcoins worth approximately 2.25 billion US dollars to two addresses. The data shows that after the transfer, Mentougou Mt Gox still holds 46162 bitcoins worth approximately $3.056 billion.
In addition, the outflow of funds from Ethereum spot ETFs has also raised concerns in the market. According to Farside Investors data, the US spot Ethereum ETF has accumulated a net outflow of $511.2 million since its launch, with a net outflow of $2.1165 billion from the Grayscale ETF.
Wang Peng further analyzed that from a technical analysis perspective, the trading volume of the cryptocurrency market has recently declined, the selling pressure has significantly increased, the bullish momentum has gradually weakened, and the bearish forces have gained the upper hand. The market's confidence in cryptocurrencies such as Bitcoin has been hit, especially with bankrupt institutions like Genesis transferring large amounts of Bitcoin to repay debts, further exacerbating market panic.
The price fluctuations in the cryptocurrency market are extremely high, and investors need to have strong risk tolerance. "Wang Peng said that investors should remain rational, avoid blindly following the trend, and fully understand the risks and characteristics of cryptocurrencies.
MicroStrategy plans to purchase Bitcoin again
With the decline in Bitcoin prices, cryptocurrency concept stocks in the US stock market have also experienced a significant drop. On the evening of August 5th, pre market cryptocurrency concept stocks in the US stock market generally fell, with MicroStrategy falling more than 17% and Marathon Digital and Coinbase falling more than 14%.
Recently, US listed company MicroStrategy announced that it is seeking to sell its Class A shares to raise up to $2 billion in funds to purchase more Bitcoin and for general corporate use. Previously, in June of this year, MicroStrategy announced the issuance of $500 million unsecured senior convertible notes to purchase more Bitcoin, and a day later raised the issue price to $700 million.
Investing in cryptocurrencies by listed companies can be seen as part of a diversified investment strategy or seeking new growth opportunities, "said Zheng Lei, Chief Economist of Samoyed Cloud Technology Group, to a reporter from Huaxia Times. However, investing in cryptocurrencies by listed companies also carries high risks. Due to the huge fluctuations in Bitcoin prices, it can have a significant impact on the financial situation of listed companies, so careful evaluation and decision-making are necessary.
Data shows that MicroStrategy is currently the publicly traded company with the largest holdings of Bitcoin worldwide. In its latest financial report, the company disclosed that in the second quarter of this year, it purchased 12222 bitcoins for $805 million at a cost of approximately $65900 per coin. With this round of decline, MicroStrategy's investment is already in a loss making state.
As of July 31st, MicroStrategy holds a total of 226500 bitcoins worth approximately $14.6 billion. The total cost for MicroStrategy to purchase these bitcoins is $8.3 billion, with an average of approximately $36821 per bitcoin. It is worth noting that in the second quarter of this year, MicroStrategy announced a digital asset impairment loss of $180 million.
In addition to MicroStrategy, Tesla is also keen on investing in Bitcoin.
On July 24th, the latest released Q2 2024 financial report showed that Tesla did not sell or buy any Bitcoin during that quarter, marking its eighth consecutive quarter without any buying or selling operations. Currently, Tesla holds approximately 9720 bitcoins with a purchase cost of approximately $337 million. Tesla's last sale of Bitcoin was in the second quarter of 2022, when the company sold over 30000 bitcoins for $936 million, accounting for approximately 75% of its Bitcoin holdings.
The reporter noticed that since the beginning of this year, more and more listed companies have started to purchase Bitcoin. Japanese listed company Metaplanet announced in April that it had purchased 1 billion yen (approximately 6.5 million US dollars) worth of Bitcoin as its financial asset. On July 22nd, the company announced another increase in holdings of 20.381 bitcoins worth approximately 200 million yen.
Different countries and regions have different regulatory policies for cryptocurrencies, and listed companies need to comply with relevant regulations and policies, otherwise they may face legal sanctions, "said Chen Qiao, an expert at Kantar think tank and a lawyer at Shanghai Guangming Law Firm. As a reporter for Huaxia Times, cryptocurrency prices fluctuate greatly, and investments may bring significant financial losses. If the investment fails or negative news appears in the market, it may damage the company's reputation and brand image.
Yu Jianing stated that the investment of listed companies in digital assets such as Bitcoin reflects their innovative attempts and forward-looking thinking in diversified asset allocation strategies. Against the backdrop of increasing uncertainty in the global economic environment, companies are attempting to seek higher returns and hedge risks in traditional financial markets by investing in digital assets.
However, the investment behavior of listed companies also comes with significant risks, "said Yu Jianing. If the investment incurs losses, it will directly affect the company's profitability and lower its financial condition. If the investment losses are severe, it may also damage the company's reputation, affect the company's reputation, and reduce the confidence of the company's shareholders and customers in the company.