Bitcoin Leads Crypto Outflow With $400M Lost Amid Recession Fears

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As a seasoned crypto investor with over a decade of market experience under my belt, I’ve seen my fair share of market turbulence and volatility. Last week’s outflow of $528 million from crypto investment products was not entirely surprising, given the escalating fears of a potential US recession and rising geopolitical tensions.

Last week, the cryptocurrency market underwent considerable volatility. For the first time in four weeks, crypto investment products experienced withdrawals totaling approximately $528 million. This abrupt change is linked to increasing worries about an impending U.S. recession and heightened geopolitical conflicts.

Crypto Outflow Surges Beyond $500 Million

In simpler terms, during this recent selling period, Bitcoin (BTC) experienced withdrawals worth about $400 million. This is a notable change from the past five weeks where deposits were made. Furthermore, the increase in Bitcoin withdrawals suggests growing unease among investors due to the current crypto market downturn.

As a seasoned cryptocurrency investor with several years of experience under my belt, I have learned to navigate through the market’s ups and downs with caution. The recent developments in Ethereum (ETH) have caught my attention, particularly the substantial outflows amounting to $146 million since the launch of Ethereum ETFs in the US. Intrigued by this trend, I decided to dig deeper.

Last week, the combined trading volume in Exchange-Traded Products (ETPs) amounted to approximately $14.8 billion, which accounted for about 25% of the overall market – a slightly below-average share. However, the price adjustment from Friday’s closing led to an impressive $10 billion reduction in the total assets under management (AUM) of ETPs.

Geographically speaking, the bulk of cryptocurrency outflows were predominantly observed in the U.S., amounting to approximately $531 million. Additionally, Germany and Hong Kong registered outflows worth US$12 million and US$27 million each. On a positive note, Canada and Switzerland took advantage of the falling prices by increasing their holdings, with inflows totaling $17 million and $28 million respectively.

Recently, there has been an increase in investments into short Bitcoin products, amounting to approximately $1.8 million. This suggests that more investors are becoming pessimistic about the immediate future of Bitcoin’s price, showing a rising bearish attitude.

Moreover, blockchain stocks also felt the impact of the overall market downturn. Last week, these investments saw withdrawals amounting to $18 million, mirroring outflows from other tech-focused ETFs. The increased worry over a possible U.S. recession is contributing to this surge in crypto sell-offs.

Recession Fears Grow

Goldman Sachs has increased its prediction for a possible U.S. economic downturn within the next year to 25%, which was previously estimated at 15%. As a result, investors are becoming more cautious and reassessing their investments in riskier assets such as cryptocurrencies.

Over the last few days, there’s been a significant drop in the Japanese yen (JPY), amounting to about 13%. Similarly, the Korean and Taiwanese markets have experienced a nearly 10% decrease. Additionally, Bitcoin (BTC) prices have dipped by approximately 18%, and S&P futures have fallen by 4%. In reaction to these market fluctuations, it’s been reported that the U.S. Federal Reserve has convened an emergency meeting due to growing uncertainty in the financial markets.

Given the anticipation, market experts believe the Federal Reserve will lower interest rates by 0.5% following their meeting. As CNBC host Ran Neuner stated, “This is the moment we’ve been watching for.” He further commented, “The Fed must act swiftly to prevent a collapse that could make the 2008 crisis seem trivial. With an election year approaching, I foresee immediate action.”

Market experts predict that a reduction in interest rates might bring some respite. Historically, such cuts initiated by the Federal Reserve have often brought stability to markets, especially during critical periods like the 2007-2008 financial crisis. As one analyst put it, “Interest rate reductions helped save the housing market in 2007.”

Swift action by the Federal Reserve is vital to avoid additional turmoil in the economy. The urgent gathering highlights the severe nature of the present economic landscape and the call for prompt intervention. Yet, Bitcoin skeptic and well-known economist Peter Schiff warned that a recession could occur if the U.S. Fed lowers interest rates excessively.

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2024-08-05 14:43