The cryptocurrency market faced a tumultuous week as significant liquidations occurred, exacerbated by economic concerns and the crash of Japan’s stock market. 

This turmoil led to widespread panic among investors and traders, with $BTC and other major cryptocurrencies experiencing sharp declines.

Crypto Market Faces Major Liquidations

On Aug. 5, the crypto market witnessed unprecedented liquidations totaling $1.08 billion. This massive sell-off affected prominent cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH), and Solana (SOL). According to Coinglass, nearly 300,000 crypto traders were liquidated from their leveraged positions due to the rapid price declines. 

The latest report from CoinShares revealed that digital asset investment products saw outflows totaling $528 million in the week from July 28 to Aug. 3. This marked the first outflow in four weeks and was largely driven by fears of a recession in the United States and geopolitical concerns, including the crash of Japan's stock market. The weakening global economy further fueled the panic among investors.

Bitcoin Leads the Sell-Off

#Bitcoin (BTC), the largest cryptocurrency by market value, led the outflows with a staggering $400 million, marking its first outflows after five consecutive weeks of inflows. BTC's price dropped sharply from around $65,000 to the $50,000 mark, resulting in long position losses of over $315 million in less than 24 hours. Short traders also faced significant losses, totaling $62.23 million.

#Ethereum (ETH), the second-largest cryptocurrency by market cap, saw $146.3 million in outflows, with its price falling by over 20%. Traders holding long positions in ETH lost a total of $305 million, while those with short positions lost more than $50 million. Solana (SOL) also experienced substantial outflows of $2.8 million.

The sudden crash of Japan’s stock market acted as a catalyst, amplifying the existing economic concerns. The ISM Manufacturing Index, a key economic health indicator, showed a significant downturn, contributing to the pessimistic outlook. According to Markus Thielen, founder of 10x Research, the weak market structure and high volatility make it premature for traders to open further leveraged long positions.

Analysts are forecasting more losses for Bitcoin and other cryptocurrencies. Markus noted that Bitcoin could drop to $42,000 if the support line at $55,000 breaks. The disconnect between the ISM Index and #BTC suggests a bleak outlook for the crypto market. With the US economy showing signs of weakness, further exacerbated by the Federal Reserve's potential dovish shift in policy, the market remains on edge.

Hackers Exploit the Market Downturn

Amid the bear market, hackers have found opportunities to profit. As Ethereum's value plummeted, funds linked to a hack on the crypto bridge Nomad were used to buy 16,892 #ETH at low prices. These funds were then siphoned through the crypto mixer Tornado Cash to prevent traceability, highlighting the ongoing security challenges in the crypto space.

The recent crash in Japan’s stock market and economic concerns have led to significant liquidations in the crypto market, causing widespread panic among investors and traders. With BTC and other major cryptocurrencies facing substantial declines, the market outlook remains uncertain. As analysts predict further losses, traders must navigate these turbulent times with caution.