According to Arkham Intelligence, a wallet believed to be controlled by the United States government transferred 300 Ether (ETH), valued at approximately $699,000, to a wallet address ending in “d46” on Aug. 5.

The onchain analytics firm also claimed that the funds within the wallet, which now shows a balance of $0, resulted from a US government seizure.

Source: Arkham Intelligence

Ethereum's price action

This reported transfer of ETH by the United States government follows days of disappointing price action following the highly anticipated launch of Ethereum exchange-traded funds (ETFs) in the United States.

Independent analyst Crypto Lion said that ETH’s struggling price action following the ETF launch was mainly attributable to a lack of demand for the smart contract asset on exchanges.

The lack of demand coincides with a significant downturn across financial markets due to an interest rate increase by the Bank of Japan that sent the price of Ethereum tumbling further.

Related: Jump Trading’s Ether dump: Smart move or sign of trouble?

A snapshot of Ethereum's price action. Source: TradingView

Ether encountered significant selling pressure largely attributable to a handful of market makers, who unloaded approximately 130,000 ETH, valued at $290 million at the time of writing, onto the market. This caused Ether to sink to lows of around $2,100 on Aug. 5, and the digital asset continues to trade well below its 200-day exponential moving average.

Ethereum ETF outflows

According to the CoinShares weekly inflows report dated Aug. 5, digital asset investment vehicles recorded their first capital outflow in four weeks.

Outflows for Ethereum investment funds and products totaled $146 million for the week, bringing the total outflow figure since the launch of the Ethereum ETF in the United States to $430 million.

Flow data for digital asset investment vehicles. Source: CoinShares

CoinShares noted that the data was impacted by $603 million in outflows from Grayscale’s Ethereum Trust, which was introduced in 2017 and has seen significant outflows since the introduction of Ethereum ETFs in late July.

CoinShares analyst James Butterfill reinforced the theory that the current market downturn is primarily driven by macroeconomic factors and geopolitical tensions. This negative sentiment among investors may potentially signal a longer recovery period for ETH than was initially expected.

Magazine: Ethereum price will lag for ‘months’ as Bitcoin surges: X Hall of Flame, Roman

On Aug. 2, $2.9 trillion vanished from the stock markets, resulting in the worst day of trading since the COVID-19 crash in 2020. Mounting recession fears and other factors have also plunged the crypto markets, flooding the sentiment with fear. 

Snapshot from the $ 2.9 trillion crash from Aug. 2, 2024. Source: Radar Hits

Bitcoin (BTC) has dropped by 27%, Ether (ETH) by 34%, and more than $1.13 billion in futures positions have been liquidated. The last-day market action has dramatically changed the Fear & Greed Index from greed (74) to fear (26), very close to extreme fear. 

ear & Greed Index from Aug. 5, 2024. Source: Alternative

The CBOE Volatility Index (VIX), which measures stock market volatility based on S&P 500 index options, reached 65, the highest level since the pandemic crash. This indicates that markets could enter an extreme turbulence phase. The reasons for this downfall are not crypto-specific but clearly affect Bitcoin and especially the altcoin market. 

On Aug. 5, 2024, during an emergency analyst call, Maximiliaan Michielsen, a financial researcher at 21Shares, highlighted the potential drawbacks of the crypto market’s unique 24/7 trading availability. He noted that “crypto was the only asset that was traded all over the weekend,” making it the sole tradable asset as the adverse events unfolded.

What is driving the recent sell-off, and how have markets changed so drastically? Recent market data reflects widespread skepticism about the ability of global policymakers, particularly the US Federal Reserve, to curb inflation without inflicting significant collateral damage. Additionally, many conditions need to be factored into the equation.

The markets believe a recession could hit the US economy

On Aug. 2, the US nonfarm payrolls report showed a steep slowdown in hiring in July, with employers adding just 114,000 payrolls instead of the expected 175,000. With this new data entry, the Sahm Rule—developed by former Fed economist Claudia Sahm—hit 0.53%, according to Fed data, surging from 0.43% in June.

Real-time Sahm Rule Recession Indicator. Source: Federal Reserve of St. Louis

The Sahm Rule is designed to detect recessions as they begin, not as they unfold. A recession signal is triggered if the three-month moving unemployment rate average increases by 0.5 percentage points or more from its 12-month low.

The indicator has successfully identified the onset of every recession in the US since 1970. Therefore, the markets could have understood this latest data entry as a possible sign of an upcoming recession and acted accordingly. 

Claudia Sahm explained to Yahoo Finance that the tool was created so that others would notice when to take action. Despite the negative signal for a recession, she believes that “there is a runway, and we are not in that danger zone yet.”

The sudden market upheaval has led numerous market participants and economists to advocate for an emergency rate cut by the Federal Reserve. Jeremy Siegel, an economist and finance professor at the University of Pennsylvania, has called for a 75-basis-point rate cut, with a subsequent 75-basis-point reduction expected at the Federal Reserve’s September policy meeting.

Japan’s yen carry trade sell pressure

A significant factor behind this abrupt market shift is the Bank of Japan’s (BOJ) decision to raise its interest rates for only the second time since 2007. Though modest, at just 0.25% from its previous range of 0% to 0.1%, the BOJ’s increase has been enough to prompt a notable reaction in global markets.

Since the 1990s, Japan has experienced persistent stagflation, characterized by simultaneous rises in unemployment and inflation. To stimulate the economy, the BOJ set interest rates to nearly 0%, which created a conducive environment for arbitrage, known as the carry trade.

Under these market conditions, a prevalent strategy involved borrowing money in yen, converting it into dollars, and investing in assets like stocks, real estate, or cryptocurrencies to earn higher returns. The key to this carry trade was achieving a yield greater than the borrowing interest rate. When executed wisely, this strategy could effectively turn into almost free money, leading many traders to adopt it.

Japan’s recent interest rate increase sets a new precedent for future adjustments, potentially aligning with the trend of other global central banks implementing record-high hikes. While some traders may have managed to sell their positions in time to secure gains, many market participants may have been forced to sell in a panic to cover their operations.

Daily chart USD/Yen. Source: Trading view

Traders facing significant losses and margin calls are selling their US stocks to raise US dollars and convert it back to Japanese yen to be able to pay back their loans. This sudden change in forex trading can lead to more selling pressure on US stocks or cryptocurrencies in the short term. 

Disappointing US tech reports reignite fear of potential AI bubble

The latest data on the US economy, combined with shifting global forex conditions, has coincided with disappointing results from tech stocks. Technology shares, which have been a leading force in the US market, represent 42% of the S&P 500 index, a benchmark tracking the performance of the top 500 US companies.

On Aug. 1, Amazon fell 9% after the e-commerce giant reported weaker-than-anticipated quarterly revenue. Intel stock plunged as it announced a $10 billion cost reduction plan that would lay off 15% of its workforce. 

Despite positive revenue reports from companies like Meta, Apple or Nvidia, tech stocks have been adversely affected, suggesting that investor concerns extend beyond earnings results. This has reignited fears of a potential AI stock bubble, further intensifying market anxiety and contributing to increased sell pressure.

Investors resort to cash with geopolitical tensions

Geopolitical tensions have been affecting the markets since the Russian incursion into Ukraine in 2022. Nevertheless, the markets have progressed despite the turbulence. However, the latest tensions between Israel and Iran have made the market fear a possible greater war in the Middle East.

The last time that Iran attacked Israel was on April 15, which was in response to Israel’s attack on an Iranian embassy in Damascus, Syria, Following the attack, the price of Bitcoin nosedived as the world shook with the uncertainty of a possible war between both countries. There is a fear that a war between these archenemies could escalate into a broader global confrontation, given that the US is a staunch ally of Israel, while Russia and China have strategic alliances with Iran.

​​The extent of other countries’ involvement will hinge on their willingness to directly engage in the conflict. Nonetheless, a regional conflict in the Middle East could have widespread collateral effects, particularly on nations involved in oil production, potentially impacting global markets.

Leena ElDeeb, the research associate of 21Shares, noted in an analyst meeting that despite Bitcoin’s narrative as a safe haven, it does not consistently fulfill that role. 21Shares views BTC as an emerging store akin to gold; however, ElDeeb mentioned that during crises, like the current sell-off, “people don’t resort to gold; people resort to cash,” which can extrapolate to Bitcoin’s price. 

Bitcoin price correct expected to intensify

All these conditions exert pressure on all markets, including the crypto markets, where money is converted into cash. The popular analyst Rekt Capital, believes Bitcoin’s price downside may last for two months before a new bullish chart pattern could emerge to a breakout. 

As for its price range, the analyst told Cointelegraph to prepare for price levels close to $40.000:

“At its lowest point, Bitcoin dipped below its 50-week moving average. Without strong buyer support right now, it goes even lower, and it would trigger an even more active sell-off as it did in late 2021 and early 2022. If it doesn’t hold either, it’s worth preparing for a failure toward $42,000.”

A perfect storm appears to be brewing in the crypto market, with participants needing to take a broader perspective and stay attuned to macroeconomic events that could potentially steer the market back into positive territory.

According to public disclosures filed on Aug. 5, Capula Management, Europe’s fourth-largest hedge fund, invested nearly $500 million in Bitcoin (BTC) exchange-traded funds. 

The hedge fund, which is based in the United Kingdom and manages upward of $30 billion in investor assets, holds shares in Fidelity Wise Origin Bitcoin Fund (FBTC) and BlackRock’s iShares Bitcoin Trust (IBIT).

According to the filing, Capula owns shares worth more than $464 million in total, reflecting its portfolio as of June 30. The filings do not indicate that Capula owns any other crypto assets.

The severe market drawdown that started in July has reversed inflows into BTC ETFs, which saw nearly $175 million in net outflows between July 31 and Aug. 2, Morningstar Inc., a fund researcher, told Cointelegraph.

BlackRock’s IBIT and Fidelity’s FBTC are emerging as blue chips among BTC ETFs, with strong uptake among professional financial advisers, Roxanna Islam, head of sector and industry research at VettaFi—a fund researcher—told Cointelegraph.

Other hedge funds are also reporting sizable positions in Bitcoin ETFs. Millennium Management in May disclosed BTC ETF holdings worth nearly $2 billion, as well as a variety of Bitcoin-related assets.

ETFs bring crypto to a multi-trillion dollar market. Source: Statista

Related: Crypto ready for next phase of adoption: Winning over financial advisers

Since first listing in January, Bitcoin ETFs have pulled upwards of $50 billion in net investor inflows. Ether (ETH) ETFs followed in June and now command approximately $8 billion in assets.

The ETF structure offers benefits—including low fees, robust investor protections, and easy accounting—that make crypto more palatable to mainstream investors. Morgan Stanely, the largest wealth manager in the United States, has reportedly started allowing its 15,000 financial advisers to recommend Bitcoin to clients.

In the US alone, ETFs represent a $9 trillion market, according to Cerulli Associates, a fund researcher.

On Aug. 5, BTC ETFs saw some of the highest-ever trading volumes, with upward of $1 billion worth of shares changing hands within minutes of the market’s opening.

“[I]t’s unlikely that significant players will invest amid high volatility and unpredictable prices,” Markus Thielen, founder of 10x Research, told Cointelegraph.

Magazine: Ethereum’s recent pullback could be a gift: Dynamo DeFi, X Hall of Flame

Ether (ETH) extended its slump on Aug. 5, plunging to eight-month lows just above $2,100, as ETH transfers by Jump Trading, rising geopolitical tensions and concerns about the health of the global economy triggered a correction in all markets.

Data from Cointelegraph Markets Pro and TradingView shows that ETH fell from a high of $3,016 on Aug. 3, dropping approximately 30% to a low of $2,116 on Aug. 5.

ETH/USD daily chart. Source: TradingView

The last time Ether traded around this level was on Jan. 3, during an uptrend fueled by the anticipation of the first spot Bitcoin exchange-traded funds (ETFs) being approved in the United States.

On Aug. 5, Ether’s price fell as much as 22%, the largest one-day decline since May 2021. It emerged that popular market maker Jump Trading moved $315 million of ETH tokens to exchanges as it prepares to unwind its crypto positions.

Ethereum investment products shed over $146 million due to recession fears

As Ether dropped to $2,100, analysts fear that additional outflows could potentially drive prices below $2,000.

According to an Aug. 5 report by CoinShares, crypto investment funds saw “outflows for the first time in 4 weeks” during the week ending Aug. 3 as investors withdrew more than $528 million.

Weekly inflows into crypto investment products. Source: CoinShares

The crypto asset management firm attributed the large outflows to fears of a global recession, which “saw US$10bn wiped off total ETP AuM.”

CoinShares analyst James Butterfill said,

“We believe it is a reaction to fears of a recession in the US, geopolitical concerns and consequent broader market liquidations across most asset classes.”

The poor sentiment was mostly focused on the two largest cryptocurrencies by market capitalization, Bitcoin (BTC) and Ether, which saw $400 million and $146.3 million outflows, respectively.

Flows by asset. Source: CoinShares

Net outflows from Ether investment products have now reached $430 million since the market debut of US-based spot Ethereum ETFs on July 23

“This data masks the positive inflows of US$430m last week from the newly launched US ETFs, but offset by US$603m outflows from the incumbent Grayscale trust.”

According to data from SoSo Value, spot Ether ETFs saw a total of $229.77 outflows against $60.42 million inflows during the week of July 29 to Aug. 2.

Total spot Ethereum ETF flows. Source: SoSo Value

Ethereum’s onchain activity slumps

The crash in Ether’s price also coincides with a decline in network activity, as evidenced by the number of new and active addresses. According to data from The Block, the number of new addresses on the later-1 token has been dropping over the last month, with the sharpest decline witnessed between July 27 and Aug. 3, from 93,840 wallets hitting year-to-date lows of 82,540.

The average number of active addresses on the Ethereum network has also dropped by 13.5% from 486,740 on July 5 to 421,259 on Aug. 2.

New and active addresses on Ethereum. Source: The Block

Daily transactions on the network have also plunged from 1.17 million on July 6 to 1.11 million on Aug. 4.

Number of daily transactions on the Ethereum network. Source: The Block

The decline in these metrics following the recent launch of spot ETH ETFs in the US is an indication that some investors prefer gaining exposure to Ether through the funds rather than directly buying and owning the token.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

After more than a week of tabulating ballots, a Democratic primary between candidates in Arizona’s 3rd Congressional District could come down to a single vote.

According to data from the Associated Press, as of Aug. 5, Democrat Yassamin Ansari was ahead of Raquel Terán by a mere 67 votes, with 99% of the votes counted in Arizona’s 3rd District. Ansari has the backing of the Protect Progress Super political action committee (PAC) — an affiliate of Fairshake and Defend American Jobs — which spent more than $1.3 million to support the Democratic candidate.

Source: Washington Post

Election officials have hundreds of ballots, if not more, to tabulate before news outlets may declare a winner in the Democratic primary on July 30. However, the race will likely go to a recount, as the margin for victory will be within 0.5% of the total votes cast — roughly 40,000 to 50,000 — and required under Arizona law.

“We are still hard at work ensuring that every vote is counted,” said Ansari in an Aug. 3 statement.

Terán, who initially trailed Ansari by a few percentage votes, said on Aug. 3 that she was “narrowing the gap” and the race was “too close to call.” Cointelegraph reached out to Fairshake for comment but did not receive a response at the time of publication.

Both Ansari and Terán expressed pro-crypto views before the primary. Ansari’s campaign website proposed “lead[ing] the way in the blockchain and crypto innovation,” while Terán’s said she was supportive of “collaborative approaches to studying blockchain and crypto innovation.”

On July 16, the Protect Progress PAC used more than $1.3 million in a media buy to support Ansari. The Defend American Jobs PAC also disseminated roughly $600,000 in a media buy to support Republican Blake Masters, who lost his primary to Abraham Hamadeh in the state’s 8th Congressional District.

Democrat Andrei Cherny, supported by a Protect Progress media buy, lost his primary to Amish Shah in Arizona’s 1st Congressional District. Shah, a former state representative, voted against an Arizona House bill to clarify income tax issues around crypto and non-fungible tokens in 2022.

Crypto influencing elections?

The potential losses in the Arizona primary would come as many experts scrutinize the role money from crypto-focused interest groups may play in the 2024 election season. California Representative Linda Sánchez reportedly called Protect Progress’ support of Ansari as a means to “buy a seat in Congress” and “silence the voices” of certain voters.

Related: Coinbase denies accusation it violated campaign finance laws

Since its creation, the Fairshake PAC and its affiliates have funded ads in favor of or against politicians in several US states, seemingly either to support ‘pro-crypto’ candidates or hamper the ambitions of ‘anti-crypto’ ones. In April, Protect Progress spent roughly $3.7 million to support Democratic candidates in Alabama and Texas who won their primaries.

As of July, Fairshake had reportedly raised more than $202 million, but Federal Election Commission records suggest that some crypto contributions may have been counted twice. The Super PAC has backed and funded media buys opposing candidates in Missouri’s Democratic and Republican primaries, scheduled for Aug. 6.

Magazine: Crypto voters are already disrupting the 2024 election — and it’s set to continue

Elon Musk filed a new lawsuit against ChatGPT-maker OpenAI and its CEO, Sam Altman, reigniting the legal fight after appearing to drop the case in June, according to an Aug. 5 complaint filed in a United States federal court in California. 

Musk co-founded OpenAI alongside Altman in 2015 and sued the company in February for allegedly violating promises to operate as a non-profit. Musk filed a motion to drop his lawsuit in June after OpenAI published a blog post revealing some of Musk’s private exchanges at OpenAI.

Related: X faces controversy over using user data for training AI chatbot Grok: Report

In the latest filing, Musk alleges Altman “intentionally courted and deceived Musk, preying on Musk’s humanitarian concern about the existential dangers posed by artificial intelligence” and “assiduously manipulated Musk into co-founding their spurious non-profit venture, OpenAI, Inc.”

AI companies fetch loftly valuations. Souce: CBInsights

In support of OpenAI’s non-profit mission, Musk “lent his name to the venture, invested significant time, tens of millions of dollars in seed capital, and recruited top AI scientists.” Then, as OpenAI approached a market-ready AI product, “Altman flipped the narrative and proceeded to cash in,” according to the filing.

In its March blog post, OpenAI revealed private emails suggesting that Musk was aware of OpenAI’s for-profit pivot. He even appears to endorse the idea, arguing that only for-profit enterprises such as Musk’s flagship business “Tesla…could even hope to hold a candle to Google” and other technology giants.

“In early 2017, we came to the realization that building AGI will require vast quantities of compute,” OpenAI said. “We and Elon recognized a for-profit entity would be necessary to acquire those resources.”

Musk has since become a critic of OpenAI — and of for-profit AI technology in general — calling the ChatGPT creato a “closed source, maximum-profit company effectively controlled by Microsoft,” in a 2023 post on the X platform.

Musk’s social media platform X is reportedly under scrutiny by Irish regulators amid reports that a change in default settings allowed users’ X data to be fed into the training of Musk’s artificial intelligence chatbot, Grok.

Magazine: How crypto bots are ruining crypto — including auto memecoin rug pulls

When it comes to DAO governance attacks, there is a fine line between the crafty methods of a scam artist and an activist investor. Drawing this distinction is vital to understanding — and preventing — governance shakedowns like the one seen recently at Compound DAO. 

The power struggle at Compound DAO transpired between a rogue group of five relatively unknown token holders called the “Golden Boys” and an army of dissenting DAO members. Drama ensued when the Golden Boys submitted a series of proposals to the DAO community for a rather innocuous request — one that would compel the DAO to invest 5 percent of its treasury for the creation of a yield-bearing instrument that would benefit all token holders. The catch? The proposal included a quirk that treasury funds for the new financial instrument would be stored in a vault controlled by the Golden Boys, not the DAO. Unsurprisingly, the proposals received opposition, yet the Golden Boys ultimately managed to squeeze by with a narrow vote of victory on its third try.

Allegations were made that the Golden Boys committed a governance attack and attempted to steal from the DAO’s treasury. While the Golden Boys denied those allegations, the group — to everyone’s surprise — agreed to settle with Compound on the condition that a similar yield-bearing instrument be created and controlled by the DAO. Prior to that truce, the Golden Boys also addressed the community’s security concerns on Compound’s message boards and took steps to mitigate the risk of vault theft by implementing a Trust Setup function.

Related: The SEC's war against Ethereum and Consensys isn’t over

Governance attacks are typically characterized as self-serving exploits that enrich the attacker to the detriment of other parties, but the Golden Boys’ behavior doesn’t quite fit the bill. To the contrary, this months-long governance struggle had all the hallmarks of an activist investor, not a scammer.

While Golden Boys’ efforts turned out to be an unexpected, welcomed bonus for Compound DAO’s token holders — who now have the option to earn extra passive income — the incident raises doubts about how much organizational trust, transparency, and democracy DAOs actually have. Furthermore, even though this DAO drama ended on an amicable note, what happens when the next round of proverbial golden boys aren’t so nice?

Activist investors can be white knights who maximize shareholder value, but they can also be bullies that drive companies into the ground. Bryan Burrough’s “Barbarians at the Gate” illustrated such a demise. Therefore, DAOs need to have protections in place — like legal agreements and voting participation mechanisms— to ward off activist investors and prevent governance attacks that go awry.

An X user explained the attack on Compound DAO. Source: DefiIgnas

There are two critical steps that DAOs should implement to limit governance dysfunction. First, DAOs should incorporate as limited liability corporations (LLCs) for two reasons: LLCs protect members from personal liability, and the law is flexible enough to allow for custom corporate governance design — both optimal features for DAOs. States like Wyoming, Tennessee, and Vermont have already enacted specific DAO LLC legislation, and Delaware’s LLC Act is another credible option due to its flexibility and the state’s significant body of case law that gives businesses greater insight on transactional liability issues and matters of corporate governance.

Incorporating DAOs may also have downstream consequences that affect DAO voting behavior. Venture capital fund a16z — the largest vote delegator for Compound’s governance — abstained from voting on the Golden Boys’ yield-bearing instrument proposal, yet their participation could have otherwise overturned the winning proposal. a16z may not have participated due to a perceived threat of legal liability. Legal documents show that Compound DAO is structured as a general partnership, which means owners (and possibly actively voting token holders) could have unlimited personal liability for actions of the DAO and its employees.

This threat is legitimate. In a recent legal action against Ooki DAO, the CFTC advocated for a novel theory of liability that would hold all voting members of the unincorporated DAO personally liable for their voluntary participation in DAO governance. To careful onlookers, the Ooki DAO legal action not only created regulatory uncertainty, it created enough fear of liability to deter any voting-eligible token holders with deep pockets from participating in DAO governance.

Related: Bitcoin’s sell-off could put ETF shares on the discount rack

DAOs with funds as token holders should be on high alert, transform into a protected corporate entity, and prepare for governance attacks by actors who might seek to exploit the voting imbalance created by this regulatory hand tie. On the other hand, newly created DAOs could seek to limit or cap fund participation to prevent whales who do not actively participate in serious governance issues from soaking up market share.

The second critical step that DAOs should implement to prevent governance dysfunction is to evolve governance participation. One purported reason the Golden Boys’ proposal won is because the voting period occurred over the weekend — when participation was expected to be abysmal. Common sense dictates that if voters will be asleep at the wheel, weekends should be vote-free. Such a change would likely not require significant technological input, but rather a simple change in governance process. Exceptions to weekend-free voting could be overturned by a supermajority vote of token holders.

Another way to increase governance participation is to experiment with AI proxy voting where AI models are trained to vote for any given issue in a token holder’s absence. DAO governance processes that allow for proxy voting by AI would need to be authorized in a DAO’s bylaws and be legally compliant with state law where token holders reside. Although this novel method comes with plenty of unanswered questions, proxy voting by AI could be a game changer for DAO governance participation and deserves more attention, legal wrangling, and experimentation.

Without changes to governance participation and design, the attack on Compound DAO’s governance may be the first of many more. The absence of an engaged voting base leaves DAOs vulnerable to activist investors acting in bad faith — or worse, a death spiral of inertia.

Agnes Gambill West is a guest columnist for Cointelegraph an affiliate senior research fellow with the Mercatus Center at George Mason University. She's the co-chair of the North Carolina Blockchain Initiative, an appointee to the North Carolina Innovation Council, and serves on the Business and Consumer Payments Advisory Council for the Federal Reserve Bank of Richmond. She has experience working as a proprietary trader and is the co-founder of an Ethereum-based blockchain payments company. She received a JD from University of North Carolina School of Law, an LLM from Duke University School of Law, and an MSc from Oxford University.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Justin Sun, founder of Tron (TRX) and Huobi (HTX), has denied rumors that leveraged futures positions from HTX have been liquidated in the past 24 hours during the sharp market downturn, claiming that HTX "rarely" engages in leveraged trading.

Sun followed up his remarks by promising to set aside $1 billion "To combat fear, uncertainty, and doubt, invest more, and provide liquidity," though details on this proposed fund remain elusive beyond his initial announcement.

Source: Justin Sun

Cointelegraph reached out to Sun for more clarification but was unable to obtain a response by the time of publication.

Weeks of rumors resurface

The speculation surrounding large leveraged positions on HTX began on July 12, after CryptoQuant founder Ki Young Ju drew attention to a $515 million long Bitcoin (BTC) futures trade open on the platform.

According to the analyst, staked Tether stablecoins (stUSDT) were likely used as collateral for the loan, noting that HTX’s $24 million Tether stablecoin (USDT) reserve remained untouched. When Ju contacted Sun and the HTX team for clarification, Sun denied allegations that he was responsible for the large leveraged trade. Sun expressed “frustration" and claimed that clients of the exchange, who are also allowed to use stUSDT and aEthUSDT as collateral, were responsible for the large futures position.

Related: Crypto market crash triggered by ‘aggressive’ selling by Jump Trading: Report

Source: Ki Young Ju

Ju also claimed that Sun refused to divulge who was responsible for the trade, citing HTX customer policy that the exchange did not comment or provide information about client trades.

The market turmoil

The unwinding of a long-established market trade known as the “yen carry trade,” a process of taking out cheap yen-denominated loans to purchase dollar-denominated assets, is largely responsible for the sharp downturn in the crypto and stock markets leading into Aug. 5.

A sudden rise in interest rates from the Bank of Japan, from 0.1% to 0.25%, has put many loans underwater, creating a situation in which many of the positions now carry a higher US dollar price tag than the loans were taken out for. The result is that investors have rushed to sell assets in an attempt to close out these losing positions and protect against the future downside risk of Japan’s central bank raising rates again.

Crypto markets responded by shedding over $1 billion as investors rushed to stabilize shortfalls caused by the recent interest rate hike. The price of Bitcoin briefly crashed below the $50,000 mark, reaching a low of approximately $49,000 on Aug. 5.

Institutional investors likewise panic sold. Weekly inflow data into crypto investment vehicles revealed $528 million in outflows amid the market downturn and broader fears of a looming global recession.

Magazine: How crypto bots are ruining crypto — including auto memecoin rug pulls.

Bitcoin (BTC) price crashed 19% on Aug. 5, reaching its lowest level in almost six months at $49,320. The sell-off caused the Bitcoin futures premium, considered the best proxy for derivatives traders’ optimism, to hit its lowest levels in three months. Traders are now debating whether Bitcoin prices below $53,000 represent a golden opportunity or if the risk of another drop below $47,000 is too high.

Bitcoin futures markets show traders are not bullish

To gauge the impact of the recent price crash, one should begin by analyzing the Bitcoin futures markets. Unlike perpetual contracts, which typically settle every eight hours, BTC monthly futures carry an embedded cost due to their longer settlement period. Sellers generally demand a 5% to 10% annualized premium relative to regular Bitcoin spot markets to compensate for this issue. In summary, premiums below 5% signal pessimism.

Bitcoin 3-month futures premium. Source: Laevitas.ch

The annualized Bitcoin futures premium (basis rate) fell to 5.5% on Aug. 5, its lowest level in three months, a sharp drop from the previous week when the indicator peaked at 12%. More notably, when the futures premium bottomed at 5% on May 2, it followed a 15% weekly Bitcoin price decline from $66,600 to $56,200. In May, Bitcoin’s price rebounded by 13% in the three days following the crash, but the current situation differs significantly.

Firstly, this time, the weekly price crash totaled 29%, which is much higher, and coincided with significant movements in traditional financial markets. The 5-year United States Treasury yield dropped from 4.08% on July 29 to 3.45% on Aug. 5, an unusual event. Essentially, traders are fleeing to the safest assets they know: government bonds and cash positions. Even gold experienced a sharp correction, falling from a $2,477 peak on Aug. 2 to the current $2,385.

To confirm whether the sentiment shift was confined to Bitcoin futures markets, one should examine the demand in BTC options markets. The put-to-call volume ratio measures the demand between put (sell) options and call (buy) options. Typically, periods of uncertainty drive up the demand for hedging, which in turn causes the indicator to favor put options, approaching or exceeding the 1.0 threshold.

BTC put-to-call options volume ratio at Deribit. Source: Laevitas.ch

The Bitcoin options put-to-call volume ratio reached 0.95 on Aug. 2 and Aug. 5, indicating prevalent fear. For comparison, the previous week’s average was 0.50, favoring call options volume by 100%. Before concluding that part of the market anticipated a price crash, one should examine the forced liquidations of BTC futures contracts. Unexpected price movements tend to cause cascading position closures due to insufficient margin.

Reduced leverage is a net positive, but sentiment remains weak

Bitcoin futures 24-hour liquidations, USD. Source: Coinglass

Data shows that $353 million in leveraged Bitcoin futures longs were liquidated over two days, the highest amount in almost four months. This evidence proves that traders were not anticipating such a strong move. However, it also confirms that some of the selling pressure originated from derivatives markets rather than regular sales in Bitcoin spot markets.

Related: Over $1B wiped out in crypto liquidations as global markets suffer

Identifying the exact reason for the Bitcoin price crash is less important, whether it reflects worsening conditions in traditional markets or excessive leverage in crypto markets. Even if Bitcoin markets are now less leveraged and excessive optimism has been reduced, trader morale is extremely low, and it will take time for the market to rebuild confidence.

Until there is an increased premium on Bitcoin futures and higher demand for call options, the odds of a sustainable price recovery above $57,000 remain low. Achieving this level would mark an 18% gain from the Aug. 5 bottom and align with the support that has held strong for the past six months, signaling strength from Bitcoin bulls.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Jump Trading’s recent transfer of hundreds of millions in Ether (ETH) has stirred debates and market speculations. 

This aggressive unloading of assets preceded a historical stock market crash in Japan on Aug. 5, where the Nikkei 225 index plummeted 12.4%, losing 4,451 points, its largest points drop ever.

Jump Trading moved around $315 million in staked Ether to cryptocurrency exchanges recently, with major transfers occurring over the weekend.

Rumors are rife that these trades might be part of a liquidation process as the proprietary trading firm prepares to wind down its crypto operations following its former CEO’s resignation amid an ongoing United States Commodity Futures Trading Commission(CFTC) probe.

Jump Trading’s Ether balance history. Source: Arkham Intelligence

Conversely, some analysts argue the firm may have anticipated a market downturn and moved swiftly to convert its risk assets into stablecoins.

According to blockchain data platform Arkham Intelligence, Jump Trading held $500 million in USD Coin (USDC) and $62 million in Tether (USDT) as of 12:00 UTC while retaining about $8.49 million in ETH (3,643 ETH).

The market crash in Japan followed the Bank of Japan’s decision to raise its benchmark interest rate for the second time since March and to the highest level in 15 years. This caused the yen to strengthen sharply after previously weakening to a 38-year low against the US dollar in June.

Related: Crypto market crash triggered by ‘aggressive’ selling by Jump Trading: Report

“The most plausible reason, as I see it, is that Jump Trading has been borrowing Yen to fund its high-frequency trading operations, perhaps to have enough liquidity at their disposal or to acquire crypto assets, in other words, as leveraged positions,” Mads Eberhardt, senior crypto analyst at Steno Research told Cointelegraph.

“Now, as the Yen has skyrocketed against the USD, making the loans measured in USD much more expensive to pay back while their potential collateral may have taken a hit as well [and] Jump Trading may have been served margin calls for their loans.”

Jump Trading has yet to comment on the matter, and the firm did not respond to Cointelegraph’s media request.

Meanwhile, onchain data reveals that other companies, such as Grayscale, have also been offloading substantial Ether holdings recently, indicating that Ether dumps are not unique to Jump Trading.

Japan’s 21st Century “Black Monday” and global recession fears

The Japanese stock market’s historic crash on Aug. 5 is fueling mounting fears of a global recession following the previous week’s disappointing US jobs data, analysts say.

This downturn, coupled with the Bank of Japan’s rate hike, has prompted fears that the end of the Japanese yen carry trade — a popular investment strategy due to Japan’s historically low interest rates — may be near.

A carry trade involves borrowing money from a country with low interest rates and converting it into another currency to invest in assets with higher returns.

“Most funds would borrow JPY, convert it to USD, and then use that to buy USD-denominated assets,” explained Justin d’Anethan, head of APAC business development at market maker Keyrock, to Cointelegraph.

Strengthening JPY could spell bad news for crypto investors as institutional funds are linked to traditional markets. Source: Google Finance

The economic instability has led some experts to believe that firms involved in yen carry trades are now struggling.

According to Eberhardt, this could be why companies like Jump Trading are liquidating their assets.

“This may have led them to raise as much fiat as possible to pay back the loans. To do so, they must liquidate their most liquid bets, perhaps leading them to the fast liquidation of hundreds of millions worth of Ether,” he stated.

“I simply cannot find another explanation for why a respected trading firm, which should be well aware that crypto’s liquidity is extremely poor during the weekend, would still proceed to dump that much Ether in such a low liquidity environment.”

Jump Trading sell-off part of a trend?

An examination of its token balance history on Arkham Intelligence reveals that the company has been offloading its Ether holdings around July 20, and not over the weekend.

The company started by moving over 120,000 Wrapped Staked Ether (wstETH) from its Wormhole Counter-Exploit Funds address. The staked Ether in this wallet was reportedly recovered from the Wormhole bridge hack in February 2022, which suffered a $325 million loss.

The address’s activity shows that the majority of these funds have been withdrawn from the Ethereum staking protocol Lido. An associated address still holds around 37,600 of those wstETH, Arkham Intelligence data shows.

Jump Trading is not alone in this trend. Other major investment firms, such as Grayscale and Paradigm, have also been liquidating their Ethereum positions.

“This $ETH obliteration is largely caused by capitulation from large funds,” commented DeFi_Mochi on X.

Grayscale’s Ether balance. Source: Arkham Intelligence

Arkham Intelligence data shows that Grayscale has unloaded nearly 600,000 Ether since July 24, around the time of the Ether ETF launch date.

With this context, some view Jump Trading’s moves as part of a broader strategy to mitigate risks in anticipation of Japan's Monday market crash.

Related: Market makers sold over $300M Ether as ETH price crashed below $2,200

“They might be just smart sellers,” Mikko Ohtamaa, co-founder of algorithmic trading firm Trading Strategy, told Cointelegraph.

Ohtamaa noted that the signs of Japan’s market instability had been apparent for weeks, giving macro traders ample time to prepare.

Jump Crypto could be winding down

According to the rumor mill, Jump Trading’s recent Ether sell-off may be a sign of the firm’s exit from the cryptocurrency market following reports last month that the US CFTC opened an investigation into the firm.

The theory states that “they wanted to exit their crypto business, which is insignificant compared to their main business in stock markets,” Ohtamaa said.

“It’s not worth the regulatory risk for them,” he continued. 

Source: Arthur Hayes

Even before the probe, Jump Trading has faced numerous challenges in the crypto space.

The firm was embroiled in market troubles when its Solana bridge Wormhole venture was hacked for $325 million in February 2022.

Additionally, they were associated with the Terra Luna collapse, where they allegedly engaged in key trading activities contributing to the crash, and the subsequent FTX crash, an exchange where the firm had heavy exposure.

These controversies have fueled speculation that Jump Trading is strategically retreating from the volatile and increasingly regulated cryptocurrency market.

All of the above

Two main theories have emerged regarding Jump Trading's recent Ether sell-off. Some analysts argue that it is more likely a response to margin calls driven by Japan's economic conditions, while others claim that it’s the beginning of the end of the firm’s crypto division.

But analysts argue that it doesn’t have to be one or the other.

“But it would make sense, based on Jump’s expertise in traditional space, they’re very aware of foreign exchange moves and might have to pre-emptively protect or correct carry trades with the JPY or just anticipated a market pullback,” d’Anethan of Keyrock said.

“This might have worked out well, especially if they’re looking to reduce their crypto activity — just hitting two birds with one stone,” he added.

Following Japan’s Monday crash, market watchers' attentions shift to the US markets.

Eberhardt points to the flow data of US Bitcoin and Ethereum spot exchange-traded funds (ETFs) this week, which will reveal how traditional investors are responding to the tumbling market.

“If they show strong inflows this week, it may calm crypto market participants in general, while the opposite is true if the ETFs see outflows.”

This week's macroeconomic environment in the US is also under scrutiny, as there are increasing signs that the country may be on the brink of a recession.

Magazine: What do crypto market makers actually do? Liquidity, or manipulation

One of United States President Joe Biden’s senior economic advisers and a former member of Ripple Labs’ board of directors will be leaving the White House to join Kamala Harris’ 2024 presidential campaign.

In an Aug. 5 notice, President Biden said Gene Sperling would leave his administration, where he had worked as a senior adviser since 2021. Reports suggested that Sperling will join Vice President Kamala Harris’ campaign with roughly three months until the presidential election, with leading candidates including herself and Republican nominee Donald Trump.

Sperling joined Ripple’s board in 2015 after serving as an economic adviser under Presidents Bill Clinton and Barack Obama. He served in the Biden administration starting in 2021. At the time of publication, Ripple’s website did not list the economic adviser as one of its nine-member board of directors.

Advisers knowledgeable on crypto?

Sperling’s departure was the latest reported move of personnel from the White House to support Harris’ presidential bid since President Biden announced on July 21 that he would not run for reelection. David Plouffe, a former member of Binance’s Global Advisory Board, will also reportedly support Vice President Harris’ campaign. Anita Dunn, who attended a roundtable with crypto industry representatives, will reportedly join a Democratic-focused political action committee.

It’s unclear if any of the advisers will have roles related to cryptocurrency or blockchain, as the Harris campaign is reportedly considering taking a public position on the technology. Certain campaign officials were expected to participate in a roundtable event sometime this week, which will include representatives from crypto firms and US lawmakers.

Related: Kamala Harris supporting crypto could impact vote in key states — Think tank

Many experts expect crypto to be a wedge issue in the 2024 US election between leading party candidates Kamala Harris, Donald Trump, and Robert F. Kennedy Jr. Trump, who spoke at the Bitcoin 2024 conference on July 27, made many pledges to attendees regarding his administration’s plans for crypto and blockchain.

In contrast, the Harris campaign — roughly two weeks old — has not provided a clear position on digital assets. The Vice President is expected to announce her running mate by Aug. 6, and potential candidates include Pennsylvania Governor Josh Shapiro, Arizona Senator Mark Kelly, and Minnesota Governor Tim Walz.

Magazine: Crypto voters are already disrupting the 2024 election — and it’s set to continue

Bitcoin (BTC) sought damage control at the Aug. 5 Wall Street open as crypto markets bounced from a brutal sell-off.

BTC/USD 1-hour chart. Source: TradingView

BTC price sees welcome bounce to near $55,000

Data from Cointelegraph Markets Pro and TradingView showed a $4,000 BTC price rebound following the start of the United States trading session.

Having dipped below $50,000 for the first time since February, Bitcoin had traders on edge as many predicted further downside as TradFi markets returned.

In the event, risk assets saw comparatively mild downside, with the S&P 500 down 3% and Nasdaq Composite Index 3.7% lower on the day at the time of writing.

US markets thus avoided the kinds of losses seen in Asia, where Japan’s Nikkei 225 saw its worst two-day combined losses in history.

As Cointelegraph reported, alleged mass selling by trading firm Jump Trading contributed to the snap reaction to the event on crypto markets.

Commenting, trading resource The Kobeissi Letter put the blame firmly at the door of the Japanese yen carry trade, a now unprofitable operation adding to the existing market pain.

“The solution to this problem is not as simple as it may seem and may require a separate thread,” it explained in a dedicated X thread.

“This is a vastly different situation than previous market downturns.”

VIX volatility index chart. Source: The Kobeissi Letter/X

Kobeissi additionally noted that the VIX volatility index had hit levels only seen twice in history — during the 2008 Global Financial Crisis and the March 2020 COVID-19 cross-market crash.

The latter drew various comparisons on the day, including from Charles Edwards, founder of quantitative Bitcoin and digital asset fund Capriole Investments.

“Some eerie similaraties to early 2020. Stocks overvalued, growing risk of recession, rising unemployment, sharp correlated global market moves down,” he told X followers.

“At some point, the Fed will step in, likely with early rate cuts and probably liquidity too. But when? Until then, expect ALL markets to correlate.”

The Federal Reserve was reported to be considering an emergency meeting to review the situation on the day, with bets on the outcome diverging considerably.

"I'm calling for a 75 basis point emergency cut in the Fed funds rate, with another 75 basis point cut indicated for next month at the September meeting - and that's minimum," Jeremy Siegel, a professor at the Wharton School of the University of Pennsylvania, predicted in an interview with CNBC.

Siegel referred to next month’s meeting of the Federal Open Market Committee (FOMC), an event which markets now see triggering a 0.5% rate cut, per data from CME Group’s FedWatch Tool.

Fed target rate probabilities. Source: CME Group

Bitcoin sell volume echoes post-halving period

Turning to Bitcoin market activity, popular trader Skew struck a balanced tone as he described a lack of “actual chaos” despite the six-month lows.

Related: Was Warren Buffett right? 5 Things to know in Bitcoin this week

“Maintained sell control often precedes this shifts to the downside - takers selling (consistently) - passive supply (limit sellers on every bounce),” part of his latest X coverage explained.

Skew noted that downside often results from sustained periods of failed breakout activity, in this case above $70,000.

“No actual chaos yet,” he concluded about the setup on largest global exchange Binance’s spot order book.

BTC/USDT order book data for Binance. Source: Skew/X

Popular trader and analyst Rekt Capital meanwhile eyed “exhaustion” among sellers during the trip to lows of $49,577, equalling a 29% correction versus July’s local highs.

“Finally, the sell-side volume has reached and even dramatically eclipsed Seller Exhaustion levels seen at previous price reversals to the upside (red box on volume),” he commented on an accompanying chart uploaded to X.

“In fact, Bitcoin hasn't seen this level of sell-side volume since the Halving in mid-April 2024.”

BTC/USD chart with trading volume data. Source: Rekt Capital/X

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Trading volumes for Bitcoin (BTC) exchange-traded funds (ETFs) surged past $1 billion at the start of trading on Aug. 5, as crashing markets triggered “extremely elevated” trading activity across crypto, Alex Thorn, head of research at asset manager Galaxy Digital, said in a post on the X platform. 

After only 20 minutes of trading, Bitcoin ETFs have clocked more than $1.3 billion in trading volume, with iShares Bitcoin Trust seeing the highest churn at upward of $875 million, according to the post.

Thorn expects BTC ETFs to see net inflows from “dip buying” as investors clamor to take advantage of a roughly 8% drawdown in spot BTC prices since Aug. 4. The downturn was led by Ether (ETH), which dropped upwards of 21% after funds including Jump Trading and Paradigm VC sold hundreds of millions of dollars worth of Ether, according to an Aug. 5 report by QCP Group.

Bitcoin prices are down around 8% on the day. Source: CoinMarketCap

Related: Crypto market crash triggered by ‘aggressive’ selling by Jump Trading: Report

Analysts say Jump has already sold over $377 million in ETH and may intend to liquidate as much as $481 million in total.

The overnight sell-off compounded a worsening macro environment that has rattled all asset classes. The S&P 500 stock index is down more than 5% since Aug. 1.

According to the report, “Macro sentiment has also worsened following poor US unemployment data last Friday. Additionally, huge unwinds across all assets [have] caused volatility to spike sharply.”

Japan’s central bank raised interest rates on July 30, forcing traders to quickly unwind positions that sought to capitalize on the country’s cheap borrowing costs.

Markus Thielen, founder of 10x Research, told Cointelegraph he expects new crypto investment to slow down until the market settles:

“The market structure, including fiat-to-crypto on-ramps, has been weak for months [...] it’s unlikely that significant players will invest amid high volatility and unpredictable prices. Many still need to exit positions and deleverage their portfolios.”

Magazine: Criminal at Bitcoin 2024, BTC Strategic Reserve Bill, and more: Hodler’s Digest, July 28 – Aug. 3

Amid reports suggesting that Robinhood halted its 24-hour trading, the company has declared that the service is currently intact.

“Our overnight trading session is currently operating,” a spokesperson for Robinhood told Cointelegraph when asked to confirm or deny the 24-hour trading service halt.

The spokesperson did not answer further questions about whether Robinhood experienced any platform issues amid market volatility and other details Cointelegraph.

Introduced in May 2023, the Robinhood 24-hour market service allows customers to invest on their own schedule. The platform is available from Sunday 12:00 am UTC to Friday 12:00 am UTC.

Multiple Robinhood users reported the trading suspension

On Aug. 5, multiple posters on X claimed that Robinhood suspended 24-hour stock trading on its platform amid massive volatility across most equity markets and alternative assets.

“Robinhood has suspended 24-hour stock trading on its platform due to elevated volatility,” wrote Jesse Cohen, a global markets analyst at Investing.com.

"Feels like March 2020 or September 2008,” Cohen added, referring to the stock market crash in 2020 and the financial crisis of 2008.

Source: Jesse Cohen

Other social media reports also suggested that Robinhood halted 24-hour trading due to huge market volatility.

“They have suspended all 24-hour trades until further notice,” Rawsalerts posted on X at 7:00 AM UTC.

According to another post by Rawsalerts, Robinhood is just one of many brokerages that have faced issues due to the massive market volatility. Other firms reportedly facing outages due to the market turbulence include Charles Schwab, Fidelity, Vanguard, TD Ameritrade, E-Trade, UPS, CenturyLink and others.

Source: Rawsalerts

"While centralized platforms retain the power to halt trading on a whim, they can’t prevent crypto traders from accessing onchain markets which have continued to operate as intended during the market crash," Ran Yi, a co-founder at Orderly Network, told Cointelegraph. He added:

"True crypto doesn’t have an on off switch: it’s designed to operate around the clock through calm and chaos alike."

Japan’s Nikkei sees the biggest drop since 1987 Black Monday

The alleged trading halt on Robinhood came amid carnage in the global stock market, with Japan’s Nikkei seeing its most significant decline since Black Monday.

The Nikkei share average shed a staggering 12.4% amid recession fears on Aug. 5. That was Nikkei’s worst performance in percentage terms since the Black Monday, which was the worst stock market crash in global financial history that took place in October 1987.

US stocks also fell sharply on Monday as part of a global market sell-off centered around US recession fears, with Nvidia and Apple tumbling 9%.

Related: Crypto products shed $528M amid recession fears — CoinShares

According to Fox Business, over $1.93 trillion has been wiped out from the US stock market today as the Nasdaq has dropped over 1,000 points. The Dow Jones Industrial Average, which had been outperforming, fell 2%.

The latest stock market crash came in response to poor jobs figures in the US last Friday, which triggered concerns over a potential economic recession and calls for an interest rate cut. According to some industry insiders, emergency rate cuts are coming soon despite the US Federal Reserve reportedly deciding against cutting interest rates last week.

Magazine: How crypto bots are ruining crypto — including auto memecoin rug pulls

Market makers’ Ether selling patterns have significantly contributed to the current crypto market decline.

Five of the top market makers have sold a total of 130,000 Ether (ETH) worth $290 million at today’s price, since Aug. 3, while Ether price crashed from $3,000 to below $2,200.

The market makers include Wintermute, which sold over 47,000 Ether, followed by Jump Trading with over 36,000 ETH, and Flow Traders, with $3,620 ETH, in third place.

GSR Markets also sold 292 ETH, while Amber Groupd sold 65 Ether, according to a research note by 0xScope, shared with Cointelegraph.

While Jump Trading was the first to start selling, Wintermute sold significantly more Ether, noted 0xScope, in an Aug. 5 X post:

“Jump Trading started dumping $ETH this past weekend, ahead of other major market makers, despite low liquidity.”

Jump Trading, Binance Deposit. Source: Scopescan

Ether is currently struggling to remain above the $2,200 psychological mark. More Ether selling from market makers and large holders could lead to lower prices and more panic selling among investors.

Related: Analysts warn of further Bitcoin downside — Could BTC revisit $42K?

Ether price struggles to remain above $2.2k

Ether’s price fell over 22.3% during the 24 hours leading up to 1:10 p.m. in UTC, to trade at $2,233, according to Cointelegraph data.

Ether price briefly wicked to the daily low of $2,195 around 6:30 a.m. in UTC, before recovering above the $2,200 mark.

ETH/USD, 1-day chart. Source: Cointelegraph

On the positive side, Ether price could double from the current low, if it follows the same patterns from two years ago, according to pseudonymous crypto trader MarketWizard, who wrote in an Aug. 5 X post:

“Despite how scary things are right now, ETH is at the sweet spot. Retesting the 2-year base that caused an x2 earlier this year.”

Ether/USDT, 1-week chart. Source: MarketWizard

Related: Bitcoin price downside may last 2 months — Analysis

What about US spot Ether ETFs?

The sharp decline in Ether’s price comes despite the launch of the first spot Ether exchange-traded funds (ETFs) in the United States, which debuted for trading on July 23.

However, Ether ETF inflows remain low, despite the historic launch.

Since launch, the US Ether ETFs recorded over $511 million worth of cumulative net outflows, according to Farside Investors data.

Ethereum ETF Flow (US$m). Source: Farside Investors

Grayscale’s Ether ETF (ETHE) accounted for the majority of the outflows, worth over $2.1 billion, while the other ETF issuers have all logged net positive inflows.

While Ether ETFs mark a significant regulatory development, ETH ETFs may only be a ‘sidekick’ to Bitcoin ETFs in terms of inflows, Eric Balchunas, senior ETF analyst at Bloomberg, told Cointelegraph:

“Bitcoin is like enough crypto hot sauce. You’re like, ‘You know, I’m good.’ These things move together anyway. Ethereum is harder to explain, but I’m just seeing it being a sidekick [to Bitcoin].”

Magazine: Criminal at Bitcoin 2024, BTC Strategic Reserve Bill, and more: Hodler’s Digest, July 28 – Aug. 3

The current Bitcoin crash could last nearly two more months based on historical price movements, before a new bullish chart pattern could lead to a price breakout, according to analysts.

Bitcoin’s downside deviation could last nearly 2 months: analyst

Bitcoin (BTC) price is currently experiencing a downside deviation, that could last nearly 2 months, according to popular analyst Rekt Capital.

The analyst wrote in an Aug. 3 X post:

“Bitcoin has returned to the Range Low area, with scope still for additional downside deviation in the near future. And currently, at ~110 days after the Halving, Bitcoin is slowly getting closer to its historical breakout point of 150-160 days after the Halving.”

BTC/USD, 1-week chart. Source: Rekt Capital

Bitcoin price briefly crashed below $50,000 on Aug. 5, after the Bank of Japan announced that it was raising its interest rate from 0% to 0.25%.

Japan’s decision had a direct impact on the US stock market and Bitcoin price as well, as traders were borrowing Japanese Yen at low interest rates to buy assets in the US market.

The crypto market experienced a $510 billion loss in total market capitalization, marking the biggest three-day sell-off in over a year.

Related: Crypto market crash triggered by 'aggressive' selling by Jump Trading - report

Bitcoin could break out from a macro bull flag after the downside deviation

Despite the gloomy outlook, an emerging bullish chart pattern is inspiring more optimism among crypto holders.

Bitcoin price could see a breakout due to an emerging bull flag, a bullish chart pattern that is used to spot upcoming rallies, according to popular analyst Satoshi Flipper, who wrote in an Aug. 4 X post:

“The most epic bull flag in $BTC history has been forming for 7 months now, imagine being upset about this.”

Bitcoin bull flag on the daily chart. Source: Satoshi Flipper

Bitcoin also seems to be forming a bull flag on the monthly chart, according to crypto analyst Elja, who wrote in an Aug. 4 X post:

“BTC giant bull flag. The Bitcoin breakout pump will be legendary.”

Bitcoin bull flag, monthly chart. Source: Elja

However, in the shorter term, Bitcoin’s downtrend could potentially extend to the $42,000 mark, according to Alex Kuptsikevich, senior market analyst at FXPro.

The analyst told Cointelegraph:

“At its lowest point, Bitcoin dipped below its 50-week moving average. Without strong buyer support right now, it goes even lower, and it would trigger an even more active sell-off as it did in late 2021 and early 2022. If it doesn’t hold either, it’s worth preparing for a failure toward $42K.”

Related: $35T US national debt could bolster Bitcoin’s adoption as ‘hard money’

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Gibraltar-based bank Xapo Bank has officially entered the market in the United Kingdom after successfully receiving its local banking license - now it is launching new banking services catering to users wanting to hold Bitcoin (BTC). 

On August 5, Xapo Bank revealed that it is the first, and only, licensed bank in the UK to offer a combined interest-bearing USD and Bitcoin banking account.

Entering UK markets

According to the announcement, Xapo customers can also send funds of up to 1 million GBP (1.275 million USD) and make payments to UK-based wallets and bank accounts. The Bitcoin account yields 1% without staking, lending, or locking up assets.

Xapo said those with Bitcoin accounts are able to spend it “like fiat” with a “universally accepted” debit card, along with other financial services such as investing in S&P 500 stocks or acquiring select cryptocurrencies.

Additionally, Xapo Bank has integrated stablecoin payment rails with USD bank accounts.

Seamus Rocca, CEO of Xapo Bank, said it was “no easy feat” to passport its banking license into the UK, though they are “eager” to expand local membership.

Joey Garcia, the director and head of regulatory and public affairs at Xapo Bank called the access to the UK market “unique” and an opportunity to share the future of digital finance:

"The UK is swiftly emerging as a global hub for cryptocurrency innovation, boasting a promising regulatory framework, a dynamic financial ecosystem, and a talent-rich environment.”

Related: What’s next for UK crypto regulations after Coinbase’s $4.5M fine?

UK crypto prospect

The UK has been active in trying to position itself as a world leader in the crypto and blockchain space. The country’s Financial Conduct Authority (FCA) has recently estimated that 10% of adults in the UK held cryptocurrencies in 2023. 

Xapo is not alone in being a new financial services provider to gain local authorization for operations from UK regulators.

On July 25, the global neobank and fintech company Revolut secured its UK banking license after a three-year regulatory process. This was a significant milestone for the company, as it is headquartered in the UK and solidified its positions in its home market.

Additionally, in mid-July, the cryptocurrency exchange Kraken announced an expansion of its custody services to customers in the UK.

Magazine: Decade after Ethereum ICO: Blockchain forensics end double-spending debate

The current crypto market crash is being directly linked to offloading by Jump Trading, according to QCP Group, one of Singapore’s first digital asset trading groups.

Ether (ETH) price fell over 21% in the 24 hours leading up to 11:20 a.m. in UTC, to trade at $2,252, according to Cointelegraph data.

The crash to an over five-month low was mainly caused by Ether selling from Jump Trading and Paradigm VC, according to an Aug. 5 report by QCP Group, that wrote:

“The immediate trigger in crypto seems to have been aggressive ETH selling from Jump Trading and Paradigm VC. The move was probably exacerbated by market makers scrambling to cut short gamma as front-end ETH volumes spiked more than 30% to 120%!”

Ether's price is struggling to remain above the $2,200 psychological mark. A potential move below could trigger more panic selling among crypto investors, leading to lower lows.

The sharp decline comes despite the launch of the first spot Ether exchange-traded funds (ETFs) in the United States, which debuted for trading on July 23.

Related: Analysts warn of further Bitcoin downside — Could BTC revisit $42K?

Jump Trading continues selling Ether

During the past week, Jump Crypto, the crypto division of Jump Trading, has shifted hundreds of millions of dollars worth of digital assets to crypto exchanges, in preparation for a sizable sale, as reported by Cointelegraph.

Jump Trading has sold over $377 million worth of wstETH since July 24, when Ether's price started to decline.

The firm is looking to sell a total of $481 million worth of Lido wstETH (wstETH), according to an Aug. 5 X post by Lookonchain, that wrote:

“Jump Trading is selling 120,695 wstETH ($481M) and has sold 83K $wstETH ($377M) since July 24, leaving 37,604 $wstETH($104M). The market also began to fall after July 24, falling by more than 33%!”

Ether price, Jump Trading selling patterns. Source: Lookonchain

Jump Trading is reportedly being investigated by the Commodities and Futures Trading Commission (CFTC). The firm’s president, Kanav Kariya, has stepped down from his role on June 24.

Jump Trading, Binance Deposits. Source: Lookonchain

Related: Hong Kong’s largest online broker launches Bitcoin and Ether trading for 22 million users

Macroeconomics played a significant part in the crypto market crash

Macroeconomic factors have also played a crucial role in the crypto market downturn.

Friday’s poor US unemployment data was a significant negative catalyst, according to QCP’s report, that wrote:

“In addition to that, huge unwinds across all assets have caused volatility to spike sharply. The VIX touched 50 (it was only higher during the Covid panic and the 2008 financial crisis), and USDJPY 1M at-the-money Vols spiked to 16%! This is likely to cause further unwinds.”

Moreover, the current military tensions between Israel and Iran could also add further downward pressure on global markets, according to QCP:

“A global risk-off mood has also set in with Israel killing the Hamas leader over the weekend. Iran has vowed to take action, and the US has actually started to deploy troops into the Middle East.”

Magazine: Criminal at Bitcoin 2024, BTC Strategic Reserve Bill, and more: Hodler’s Digest, July 28 – Aug. 3

Cryptocurrency assets started seeing significant outflows last week amid growing fears of a recession in the United States and geopolitical concerns, according to a new report by the crypto investment firm CoinShares.

The week of July 28 to Aug. 3 saw digital asset investment products posting outflows for the first time in four weeks totalling $528 million, CoinShares reported in its latest digital asset fund flows report published on Aug. 5.

CoinShares noted that the latest crypto sell-off is believed to be a reaction to fears of a recession in the US, geopolitical uncertainty and consequent broader market liquidations across the majority of assets.

Bitcoin saw outflows totaling $400 million

As the biggest cryptocurrency asset by market value, Bitcoin (BTC) led last week’s crypto outflows, which totaled $400 million, CoinShares’ data suggests. The sell-off marked Bitcoin’s first outflows after five weeks of inflows.

Ether (ETH), the second-largest cryptocurrency by market cap, posted $146.3 million in outflows last week, with Solana (SOL) seeing an additional $2.8 million in outflows.

On the other hand, multi-asset crypto investment products saw inflows of $18.1 million, with short-Bitcoin also seeing inflows of $1.8 million last week.

Weekly crypto asset flows from July 28 to Aug. 3, 2024. Source: CoinShares

“Blockchain equities continued to see outflows, with last week seeing a further $18 million, in line with outflows from broad tech-related exchange-traded funds,” CoinShares stated.

Analysts expect more losses with Bitcoin dropping to $42,000

As CoinShares’ analysis covered the weekly period from July 28 to Aug. 3, it didn’t include the latest sharp decline across multiple markets on Aug. 4 and Aug. 5.

After losing the $69,000 support on July 29, Bitcoin continued to drop below $50,000 on Aug. 5, reaching its lowest price mark since February 2024.

According to data from CoinGecko, BTC is down 15.6% over the past 24 hours and is trading at $51,301 at the time of writing.

Bitcoin (BTC) 30-day price chart. Source: CoinGecko

Following the market drop, 290,000 traders were liquidated in the past 24 hours, with total liquidations netting $1.1 billion, CoinGlass data indicated.

While industry advocates like Joseph Young suggested that the “bottom is nearing,” some analysts were less optimistic about the potential BTC price moves.

Related: Grayscale Ethereum ETF outflows exceed $2B

“Although Bitcoin has been in a gradual downtrend, marked by three tops and two bottoms, we anticipate the support line at $55,000 will break, potentially driving prices down to $42,000,” 10x Research CEO Markus Thielen wrote in the latest market update on Aug. 5.

According to the analyst, Ether (ETH) could further drop below $2,000. He added:

“While this may seem extreme to some, economic weakness, as indicated by our ISM report, ongoing weak market structure, on-chain data, and our cycle analysis suggest further stress ahead.”

Magazine: Ethereum price will lag for ‘months’ as Bitcoin surges: X Hall of Flame, Roman

Crypto investors and traders lost approximately $1.08 billion in total liquidations amid uncontrolled falling prices of prominent cryptocurrencies, including Bitcoin (BTC), Ether (ETH) and Solana (SOL).

On Aug. 5, crypto market prices witnessed a significant decline owing to the weakening global economy, which was catalyzed further by the sudden crash of Japan’s stock market. In the process, nearly 300,000 crypto traders were liquidated off their leveraged positions or collateral trades, according to data from Coinglass.

A heatmap of cryptocurrency liquidation over the past 24 hours. Source: Coinglass

Amid the ongoing bear market, the prices of the most popular cryptocurrencies depreciated, with BTC and ETH falling down by over 10% and 20%, respectively. As a result, crypto traders anticipating a prolonged bull run lost their positions to the bloodbath.

As Bitcoin prices crashed from around $65,000 to the $50,000 mark, traders holding long positions on crypto exchanges lost over $315 million in under 24 hours. Shorters, on the other hand, lost $62.23 million in the process.

During the same timeline, traders with Ethereum long positions lost a total of $305 million, while traders holding short positions lost more than $50 million.

Total crypto liquidations. Source: Coinglass

In total, long positions across all crypto assets lost over $930 million in 24 hours, while shorters lost $163.45 million. Out of the lot, nearly 80% of all traders got rekt in less than 12 hours.

According to Coinglass data, the largest single liquidation order happened on the crypto exchange Huobi, where a treader lost $27 million in BTC/USD trading pair.

Highest liquidations on crypto exchanges over 24 hours. Source: Coinglass

As shown above, most liquidations took place on Binance, the largest crypto exchange by trading volume. Other prominent crypto liquidations were recorded on OKX, Huobi, ByBit and BitMEX, among other exchanges.

Related: Bitcoin dips below $50K: Crypto market crashes 17%

While traders patiently await a comeback of the bull run, hackers found an opportunity for profits amid the bear market.

Right when Ether lost over 20% of its value—from approximately $2,760 to $2,172 — funds linked to a hack on crypto bridge Nomad in August 2022 were used to buy 16,892 Ether.

Onchain activity showed that hackers bought ETH in low prices and siphoned it across crypto mixer Tornado Cash to deter traceability.

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