The Crypto Market Sees $55 Billion in Capital Drain in August
The crypto industry has been experiencing significant volatility in price movements, largely driven by events and liquidity shortages. In August, the market witnessed a noticeable outflow of approximately $55 billion in capital from major cryptocurrencies, according to a recent report by Bitfinex.
Bitfinex’s Analysis Reveals $55 Billion Exited the Market
Bitfinex analyzed the aggregate realized value of Bitcoin (BTC), Ethereum (ETH), and major stablecoins like Tether’s USDT, USD Coin (USDC), BUSD, Dai, and TrueUSD (TUSD). The analysis indicated that about $55 billion in capital left the market in August.
In July, the market experienced inflows as Bitcoin surpassed $30,000 and over $100 billion entered the market. However, this momentum shifted in early August due to profit-taking and mixed signals from the US economy, resulting in outflows.
Institutional Investors Lose Interest
During this period, institutional investors showed decreased interest as digital asset investment funds experienced outflows after four weeks of heavy inflows. This trend has continued into September, with outflows totaling $294 million so far.
The Causes of the Capital Drain
The report highlights that August’s capital drain was primarily driven by two isolated events that led to significant price movements. The flash crash on August 17 caused Bitcoin’s price to drop by 11.4% within hours.
The crypto derivative market has also slowed down, with Ether (ETH) futures and options markets seeing a nearly 50% decrease in average daily trading volume compared to the two-year average.
Liquidity Crunches and Investor Conviction
Bitcoin has also experienced liquidity shortages, with data indicating that almost 69% of all mined Bitcoin have remained untouched for over a year. This suggests strong investor conviction and optimism about the future of the digital currency.
September has been relatively calm in terms of price movement, and the industry is eagerly anticipating the start of the next bull market. However, some believe that the bull run actually began in March, but the market has yet to fully recognize it.
Hot Take: The Crypto Market Faces Capital Outflows Amidst Volatility
The crypto market experienced a significant capital drain in August, with approximately $55 billion exiting major cryptocurrencies. This outflow was driven by isolated events and mixed signals from the US economy. Institutional investors lost interest, leading to further outflows in September. The flash crash on August 17 caused a notable drop in Bitcoin’s price. Additionally, Ether futures and options markets have slowed down considerably. Despite these challenges, Bitcoin shows resilience with a large portion of mined coins remaining untouched for over a year. As the industry awaits the next bull market, some argue that it may have already started in March. Overall, the crypto market continues to navigate volatility and uncertainty.
By
By
By
By