CoinWorld.com reports:
In the past two days, a number of cryptocurrencies, including Bitcoin, have once again experienced a sharp decline. The price of Bitcoin fell to $57,000, marking an intraday drop of nearly 5%. Similarly, Ethereum also fell by nearly 5% to $3,149, while other cryptocurrencies followed suit, plunging the market sentiment into pessimism. Within the industry, concerns about the uncertainty of future markets and short-term volatility have led to panic selling among investors. Structural issues within the market are also cited as a key reason for the sharp downturn.
Market capitalization evaporates by 4.5 trillion yuan
As of July 4th Beijing time, Beijing Business Daily noted that since July 2nd, Bitcoin has dropped successively from $63,747, breaking through $63,000, $62,000, $61,000, and down to $60,000. As of July 4th, Bitcoin’s sharp decline continued, once again plummeting below $57,000.
By 5:45 PM on July 4th, Bitcoin’s latest price was reported at $57,772, a 4.18% decline in the past 24 hours, with a 6.54% drop in the past week and a significant 19.05% drop in the past month. Under the plummeting Bitcoin, other cryptocurrencies in the market were similarly not spared. Ethereum recorded a 24-hour decline of 4.33%, a 6.79% drop in the past week, and a 17.82% drop in the past month. SOL saw a 7.28% decline in 24 hours, a 4.00% drop in the past week, and an over 22.95% decline in the past month. Dogecoin’s decline in the past month was as high as 31.96%.
In terms of total market value, the latest total market value of cryptocurrencies is $2.13 trillion, down more than $600 billion from the year’s high of $2.76 trillion, equivalent to about 4.5 trillion yuan.
Amidst the sharp decline, fear looms large in the cryptocurrency market. “Overall, there is considerable selling pressure in the current market,” said Yu Jianing, Co-Chairman of the Blockchain Special Committee of the China Communications Industry Association and Honorary Chairman of the Hong Kong Blockchain Association, in an interview with Beijing Business Daily. On one hand, wallets labeled “German government” on the blockchain began transferring previously seized bitcoins to trading platforms. Even after successive transfers, this address still holds over 43,300 bitcoins worth about $2.55 billion, a move often interpreted by the market as a potential sell-off signal, increasing investor panic and further exacerbating selling pressure in the market.
Structural issues within the market are also key reasons for the sharp downturn. The cryptocurrency market is characterized by high levels of leveraged trading, where many investors speculate using leverage. When the market experiences significant volatility, the risks associated with leveraged trading are amplified, leading to frequent forced liquidations and cascading bankruptcies, further intensifying selling pressure. This high leverage and high volatility make the market susceptible to sharp fluctuations when faced with negative news.
Market sentiment and investor psychology are also rapidly changing. Yu Jianing believes that cryptocurrency investors are relatively young and emotionally volatile. When the market falls, panic easily spreads among investors who are concerned about the uncertainty of future markets and short-term volatility, leading to panic selling.
Renowned economist Pan Helin stated that fluctuations in cryptocurrencies like Bitcoin are normal because they are playgrounds for a few speculators. Speculators include both bulls and bears, theoretically causing Bitcoin’s fluctuations to move opposite to those of the US dollar. However, in reality, cryptocurrencies currently have weak correlations with other assets, so the primary reason lies in the bullish and bearish speculation in cryptocurrencies.
Over 110,000 speculators liquidated
This continuous plunge in cryptocurrency prices has caught many investors off guard. Beijing Business Daily noted that as prices fell, liquidations in the cryptocurrency circle intensified. According to data from CoinGlass, as of 11:00 AM on July 4th, 110,565 people had been liquidated in the past 24 hours, with liquidations totaling $300 million. The losses were predominantly among investors who had long positions on the market. As of 5:45 PM the same day, another 105,007 people were liquidated in the past 24 hours, with liquidations totaling $295 million.
The volatile rise and fall of the cryptocurrency market reflects its high-risk nature. Yu Jianing believes that when facing extreme market conditions, investors need to comprehensively consider various risks, maintain rationality and caution, in order to better cope with market fluctuations and protect their own interests.
On one hand, the risks of leveraged trading require heightened attention from investors. While leveraged trading can amplify profits, it also magnifies risks. In cases of sharp market fluctuations, leveraged trading can easily lead to investor liquidations and massive losses. In this recent downturn, over 110,000 people were liquidated, primarily because many investors excessively utilized leverage and were overly optimistic about market conditions.
Additionally, market sentiment and psychological risks are key factors contributing to extreme market conditions. The cryptocurrency market is highly emotional, where investor panic and greed often magnify market volatility. When the market declines, panic spreads, leading to more selling and further price declines. Conversely, during market rallies, greed drives investors to chase higher prices, inflating market bubbles.
Yu Jianing believes that liquidity risks are particularly evident during extreme market conditions. Cryptocurrency markets have relatively low liquidity, especially during periods of sharp fluctuations when trading volumes spike dramatically. This lack of liquidity can make it difficult for investors to sell assets at desired prices, further exacerbating losses.
Beware of multi-faceted risks
It is foreseeable that cryptocurrencies, including Bitcoin, will continue to experience roller-coaster price fluctuations.
However, it is important to note that alongside this, speculative trading activities in cryptocurrencies are resurfacing. Beijing Business Daily observed recent marketing advertisements by cryptocurrency exchanges promoting speculative trading. Additionally, numerous scams and illegal fundraising schemes under the guise of cryptocurrencies continue to emerge.
In response, regulatory authorities in multiple regions have successively issued risk reminders regarding illegal financial activities related to speculative cryptocurrency trading. It is crucial to correctly understand the essential attributes of cryptocurrencies and related business activities, establish correct investment concepts, select investment and financial products from legitimate financial institutions, refrain from organizing or participating in speculative cryptocurrency trading activities, refrain from easily believing in high-profit propaganda, and avoid casually disclosing personal information or making transfers.
Yu Jianing pointed out that looking ahead from the perspective of market trends, the cryptocurrency market will continue to exhibit high volatility. In the short term, the market may continue to be influenced by macroeconomic environments, policy changes, and market sentiment, leading to sharp fluctuations. In the medium to long term, the development of the cryptocurrency market will depend on technological innovations and the maturity of the ecosystem. The technological upgrades and application expansions of emerging projects will to some extent determine the future direction of the market.
Yu Jianing believes that in the coming years, governments worldwide may further increase their regulatory efforts on cryptocurrencies. It is expected that more countries will introduce specific regulatory policies involving anti-money laundering, consumer protection, tax policies, and more. For investors, maintaining rationality and caution is crucial. They need to prioritize risk management, fully understand the complexity of this market, and recognize the diversity of its risk sources. Any attempt to speculate on rises or falls can be extremely dangerous. Secondly, avoiding high leverage is particularly important. Investors should refrain from borrowing money or using high leverage for investments, as these actions can lead to serious consequences.
Beijing Business Daily reporter Liu Sihong