Bitcoin plunged deep into the red Wednesday morning, dropping nearly 4% to $56,000, as a massive sell-off in the stock market followed disappointing U.S. macroeconomic data. The ripple effect was felt across the crypto market, with Ether, the second-largest cryptocurrency by market capitalization, losing nearly 3% and hovering around $2,300.
Other major cryptocurrencies also saw significant declines, with BNB, Solana, Dogecoin, and Cardano shedding over 7%, 4%, 5%, and 4%, respectively. Overall, the global crypto market was down 3.3%, with total market capitalization slipping to $1.98 trillion.
The latest economic data indicating sluggish U.S. manufacturing activity in August has caused investors to be concerned about the health of the U.S. economy. This week’s upcoming job reports are particularly anticipated, as they could provide key insights into the Fed’s next move on interest rates in September.
Amid this uncertainty, Ryan Lee, Chief Analyst at Bitget, shared his perspective in an email to Quartz. He pointed out that the “sell the news” effect—a trading strategy where investors sell assets following the anticipation of a significant event—is currently in play. According to Lee, short-term market sentiment and investor behavior could indeed exert downward pressure on Bitcoin and other assets, as investors often take profits after positive news materializes, leading to a temporary market decline.
However, Lee also emphasized that while a potential rate cut might trigger a short-term pullback, the market is likely to recover in the long run. He believes that a more accommodative monetary policy could ultimately benefit the market, paving the way for a stronger recovery down the line.
“Investors should consider this distinction when formulating investment strategies, rather than focusing solely on short-term price fluctuations,” he added.
Spot Bitcoin ETFs are struggling, too
Investors are steering clear of spot Bitcoin ETFs, which have seen consistent outflows for the past week. According to ETF tracker Farside, since August 27, these funds have experienced cumulative outflows totaling $767.6 million. The ongoing outflows reflect broader market uncertainty and hesitation around digital assets, even as the industry awaits potential catalysts for a reversal in sentiment.
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