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Bitcoin and Cryptocurrency Market Update
Over the past day, Bitcoin has experienced a modest increase of 1.5%; however, it has seen a decline of 4% for the week. The cryptocurrency traded within the range of US$114,280 (approximately AU$176,325) to US$119,290 (around AU$184,055) during this period. Similarly, Ethereum (ETH) and other altcoins mirrored this trend, with Ethereum priced at US$3,530 (AU$5,445).
The market’s volatility has been attributed to a resurgence in the strength of the US dollar, a development sparked by US President Donald Trump’s announcement regarding new global tariffs aimed at trade surpluses. This increase in uncertainty has notably sent shockwaves through global markets.
According to Robin Brooks of the Brookings Institution, tariff-driven inflation is beginning to manifest, contributing to the dollar’s rise. Brooks expressed on social media that the anticipated inflation from tariffs was slower to materialise than expected, but it is now becoming evident.
"There are numerous reasons being offered for the Dollar’s decline this year. At the heart of it lies a fundamental macroeconomic narrative: the tariffs were meant to elevate inflation, but this did not occur as quickly as anticipated. Now, however, inflation is on the rise," remarked Brooks.
The markets were jolted into reaction as Trump detailed sweeping tariff measures, proposing rates between 10% and 15% based on trade surpluses. Concurrently, newly released data exhibited early inflation signs in the Federal Reserve’s core Personal Consumption Expenditures (PCE) measure, intensifying inflationary concerns.
Long Positions Liquidated Amid Price Declines
The recent downturn in Bitcoin’s price led to liquidation of long positions totalling US$195 million (about AU$300.1 million) during the weekend, as highlighted by analysts at CryptoQuant. As noted in a tweet by CryptoQuant, the price of Bitcoin dropped approximately 4% following Trump’s tariff announcement, correlating with the significant liquidation of these positions.
According to CryptoQuant analyst J.A. Maartunn, short-term cryptocurrency holders are experiencing substantial losses as prices decline, resulting in increased selling activity. Notably, on August 1, over 40,000 BTC were transferred to exchanges at a loss, marking the highest volume of such transactions in over a fortnight. This data suggests a wave of capitulation among both large investors and newer market participants.
Linh Tran, a market analyst at XS.com, indicates that the current price dynamics signal a diminishing euphoria among traders and a retreat from speculative investments. He further pointed out that Bitcoin’s challenges in maintaining upward momentum are largely due to growing prudence from institutional investors.
In conclusion, as Bitcoin and the broader cryptocurrency market navigate through this turbulent phase driven by external economic forces and sentiment shifts, investors are advised to remain vigilant. The ongoing developments surrounding inflation and monetary policy are likely to influence market dynamics in the foreseeable future.
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