Volatility took charge of digital asset markets on Thursday, with several major cryptocurrencies seeing sudden and sharp declines. The price of bitcoin dropped to $57,500, falling 3% over a span of one hour. The wider crypto market saw a 2.24% decrease over the last 24 hours to $2.04 trillion.
The last time bitcoin sold off to this price level, global equity markets were also deeply in the red. The S&P 500 ended 3% lower after seeing its largest loss in a single trading session since 2022, with the unwinding of the yen carry trade and fears of a US recession likely to blame for market wide panic on Aug. 5.
Equities across the world were in a far better position on Thursday, and Wall Street indices ended higher after retail sales data came in ahead of expectations. However, digital asset markets did not respond the same way to that economic data.
Although there is no clear catalyst that explains the sell-off, market participants are wary of a potentially significant bitcoin sale by the US government. A wallet associated with the US government transferred 10,000 BTC seized from Silk Road to a Coinbase Prime wallet earlier this week, according to data from Arkham.
Bitcoin miner reserves are also sitting at a three-year low, suggesting that bitcoin mining firms could be selling off their holdings as they see thinner profit margins amid soaring network hashrate.
Onchain analysts at Glassnode found that there has been a consistent regime of sell-side pressure in digital asset markets. Analysts pointed to the cumulative volume delta metric, which measures the net difference between buying and selling volumes over a specific timeframe, which has fluctuated between negative $22 million and negative $50 million over the last two years.
“Activity in spot markets shows that there has been a net bias towards sell-side pressure of late, and this has not yet completely subsided,” the analysts said.
Despite the sell-side pressure, wealth held by longer-term bitcoin investors remain historically elevated compared to other periods where there has been previous all-time high breakouts, which suggests to the analysts “there is a degree of investor patience on display, and waiting for higher prices.”
“The lack of panic selling amongst this cohort in lieu of the largest price contraction of the cycle highlights a resilience of their aggregate conviction,” the analysts said.
August 16, 6:32 a.m. ET: Two additional paragraphs were added at the end of the article to provide context on high conviction from Bitcoin holders.
