Risk Aversion in the Cryptocurrency Market: Reasons for the Decline

Risk Aversion in the Crypto Market: Reasons for the Decline

At the beginning of the week, Bitcoin reached peak levels but retreated due to concerns over trade wars, reducing investors' risk appetite. Bitcoin lost 8.3%, while Ethereum experienced a 16.1% drop.

Liquidation Wave in the Crypto Market

The former President Trump's threat of applying a 100% tariff on imports from China shocked the markets and prompted investors to go into sell-off mode. After surpassing $126,000 during the week, Bitcoin plummeted below $103,000 on Saturday morning, experiencing a significant decline. During this process, over $19 billion in leveraged positions were liquidated, with $16.7 billion of that coming from long positions.

This liquidation volume reached a level 10 times greater when compared to the FTX collapse in 2022 and the sharp sell-offs during the COVID period. However, the growth of the crypto market since then has limited the impact of this decline.

On the other hand, Ethena company's stablecoin USD briefly fell below $1, but the team reported that their ongoing operations were continuing smoothly. Additionally, the potential government shutdown in the U.S. has increased uncertainty in the markets.

Key Developments of the Week

• Bitmine purchased $103.7 million worth of Ethereum, bringing its ETH assets in its treasury to approximately $12.4 billion.
• BNB surpassed $1,340 during the week, reaching an all-time high.
• The DeFi platform Jupiter on the Solana network plans to launch its own stablecoin in partnership with stablecoin issuer Ethena.

Market Status: Declines and Rises

As the market shuns risk, notable sell-offs occurred, especially among memecoin-type altcoins. The total market value of memecoins dropped by 25%, while BONK saw a 34.3% decline. Furthermore, leading on-chain analysis platform DeFiLlama raised doubts regarding the accuracy of certain data about the Aster project, causing ASTER to lose 39.6% of its value alongside a loss of trust in the project.

The information presented here does not constitute investment advice.