It Was a Tumultuous Week: What Drove the Price Drop?

Welcome to the Asia Pacific Morning Brief—your essential digest of overnight crypto developments shaping regional markets and global sentiment. Monday’s edition is last week’s wrap-up and this week’s forecast, brought to you by Paul Kim. Grab a green tea and watch this space.

Last week, Bitcoin’s price experienced a roughly 4% decline. While this is not uncommon for the notoriously volatile cryptocurrency, it’s certainly unsettling for investors who had watched its price surge above $120,000 just two weeks ago, only to see it fall back to the $100,000 level.

The Whale’s Ripple Effect

What drove this sudden downturn? A closer look reveals a two-pronged attack from a whale and a faltering stock market.

The initial trigger for the price drop was a single, long-time Bitcoin holder. According to on-chain analytics platform Lookonchain, this “whale” held over 100,000 bitcoins.

Last Monday, they abruptly began selling off their holdings on exchanges like Hyperliquid and shifting into Ethereum (ETH). This sell-off lasted over a day, causing Bitcoin’s price to plunge from around $114,000 to $108,600.

Fortunately, once the cause was identified as a one-off event, the market stabilized and began to recover. By Thursday night, Bitcoin had clawed its way back up to $113,500, nearly its starting point before the drop.

AI Stocks Bring Down the Broader Market

Just as Bitcoin was on the mend, an unexpected new threat emerged. Leading AI and data center companies, which have been a primary engine of the US stock market’s rise all year, released disappointing Q2 earnings reports. The reports cited concerns over high debt and declining profitability.

• CoreWeave (CRWV) saw its stock plummet by 33.1% after its Q2 report.

• Marvell Technology (MRVL) fell about 19% after its data center sector underperformed market expectations.

• Even market leader NVIDIA (NVDA), despite achieving record Q2 revenue, was not immune, dropping 3.32% as the negative sentiment spread.

This decline in AI stocks led the Nasdaq to fall 1.32%, its steepest drop since the employment-driven plunge on August 1st. And because Bitcoin has shown a high correlation with the Nasdaq since June, its price dropped 3.72%.

This sequence of events illustrated how interconnected today’s risk assets have become.

What’s Next for Bitcoin?

With Bitcoin struggling, market forecasts are mixed. Some analysts remain bullish, predicting a swift recovery, while others fear a further drop to the $100,000 level.

Many expect the price to find support around $107,000, but some pessimists warn of a deeper correction to $92,000 if the downturn intensifies.

This pessimism stems from Bitcoin’s recent lack of momentum compared to Ethereum, which has garnered more market attention. Despite a similar 6.31% drop last week, Ethereum’s sentiment and upward momentum remain strong.

At one point, the “unstaking fear” among Ethereum investors seemed widespread, but it now appears to have largely faded. Tom Lee, chairman of Ethereum DAT company Bitmine, even claims ETH could reach $5,500 in a few weeks and hit $10,000-$12,000 by year’s end. This would require a monumental 100% price increase in four months from its current trading price of $4,483.

Two major macroeconomic events could sway the market in the coming week. The first is Tuesday’s US bond auction, which will see nearly $290 billion in short-term bonds hit the market. This could hurt liquidity and put further pressure on Bitcoin.

The second is Friday’s US non-farm payroll (NFP) release and unemployment figures. A weak NFP below 60,000 could increase expectations for continued interest rate cuts, likely boosting risk assets like Bitcoin.

Last week’s events prove that Bitcoin’s price is now more closely tied to global liquidity and the broader US market than its own internal drivers. Investors should remain cautious during this period of high potential volatility.