Bitcoin Price Crashes To $49,000: Key Reasons Explained

Over the past 24 hours, the crypto market has witnessed a severe downturn, with Bitcoin’s price tumbling down 15% to a low of $49,000 on Binance (BTC/USDT), marking a big departure from its $70,000 high last week—a 26% crash. Similarly, Ethereum (ETH) plunged 39% from $3,400 to $2,100. This downward trend was not isolated but echoed across the altcoin spectrum, which experienced even steeper declines.

#1 Recession Fears Cause Bitcoin Crash

The initial spark for the present market volatility appears to stem from intensifying fears of a US recession, triggered by unexpectedly weak US job market data on Friday. The July report showed a gain of only 114,000 jobs—significantly below the Wall Street prediction of 175,000. This was the weakest job growth since December of the previous 12 months and nearly the bottom for the reason that start of the COVID-19 pandemic in March 2020.

Charles Edwards of Capriole Investments remarked via X, “Each time the unemployment rate turns up because it has today, we now have a recession. Just because the Fed was too slow to tighten in 2021, it looks like they were too slow to ease in 2024.”

Further compounding the market’s nervousness was the revelation that Warren Buffett’s Berkshire Hathaway sold about 50% of its Apple holdings. This sell-off by one in every of the world’s most watched investors was interpreted as a move to hedge against potential market downturns, considering Berkshire Hathaway disclosed holding a record $277 billion in money in its Q2 report.

#2 Yen Carry Trade Unwind

Further exacerbating the market’s fall was a big movement within the forex markets, particularly with the Japanese yen. After the Bank of Japan raised its key rate of interest, the yen strengthened considerably against the US dollar. This move pressured traders who had engaged within the “yen carry trade”, borrowing yen at low rates to buy higher-yielding US assets.

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Adam Khoo noted, “The sharp rise within the JPY/USD is causing an enormous unwind of yen carry trade positions and contributing to the sharp decline in US stocks.” The reversal of those trades has probably not only impacted the forex and stock markets but in addition had a cascading effect on Bitcoin and crypto as assets are liquidated to cover losses and repay yen-denominated liabilities.

BitMEX founder Arthur Hayes commented via X, “My TradFi birdies are telling me someone big got smoked, and is dumping all #crypto. No idea if that is true, I won’t name names, but let the fam know should you are hearing the identical?????”

#3 Jump Trading And Large Sellers

There have been unusual sell orders recorded across major exchanges equivalent to Kraken, Gemini, and Coinbase, predominantly on a Sunday, which is often a quieter trading day. This implies orchestrated actions by large players, potentially involving the unwinding of positions by firms like Jump Trading.

Jump Trading has reportedly been involved in substantial unloading of Ethereum, amounting to about $500 million value over the past two weeks. Market rumors suggest that the corporate’s sell-off may very well be a strategic exit from its crypto market-making ventures or an urgent need for liquidity. Ran Neuner commented via X: “I’m watching this selling by Jump Trading […] They’re the neatest traders in world, why are they selling so fast on a Sunday with low liquidity? I might imagine they’re being liquidated or have an urgent obligation.”

Dr. Julian Hosp, CEO of the Cake Group, suggested on X: “The rationale for the crazy crypto unload appears to be Jump Trading, who’re either getting margin called in the standard markets and wish liquidity over the weekend, or they’re exiting the crypto business as a result of regulatory reasons (Terra Luna related). The sell-off is relentless atm.”

Moreover, Mike Alfred highlighted the potential for distress inside the market, suggesting that a big Japanese fund might need collapsed, holding substantial amounts of Bitcoin and Ethereum. “A giant Japanese fund blew up. Unfortunately, it was holding some Bitcoin and Ethereum. Jump and other market makers sensed the distress and exacerbated the move. That’s it. Game over. On to the following one,” Alfred stated.

#4 Liquidation Cascade Exacerbates Bitcoin Price Crash

The market witnessed a dramatic increase in liquidations, with CoinGlass reporting that 277,937 traders were liquidated within the last 24 hours, resulting in total crypto liquidations of roughly $1.06 billion. The biggest single liquidation order, valued at $27 million, occurred on Huobi for a BTC-USD position.

In total, $302.07 in Bitcoin longs were liquidated within the last 24 hours, in accordance with CoinGlass data. These forced liquidations, driven by margin calls and stop-loss orders, have amplified the downward pressure on cryptocurrency prices, pushing them further into the red.

#5 Trump Momentum Fades

One other less important factor may involve the shifting political landscape, as Kamala Harris gains in accordance with Polymarkets against Donald Trump (Harris 43% vs. Trump 55%). This shift is perceived negatively by the Bitcoin and crypto market. Your entire market is favoring a Trump win. He wants to construct a “strategic Bitcoin stockpile” and over the weekend said BTC may very well be used to repay the US debt of $35 trillion.

Polymarket Trump vs Harris | Source: @jdorman81

#6 Mt. Gox Distributions Still Affecting Market Liquidity

Finally, the continued distribution of Bitcoins from the defunct Mt. Gox exchange continues to influence the market. As former users of the exchange receive and potentially sell their returned Bitcoins, this has added to the selling pressure available on the market, further depressing prices.

At press time, BTC bounced off the support and recovered to $52,909.

BTC price, 1-day chart | Source: BTCUSDT on TradingView.com