“Be Cautious”—Coinbase Issues Urgent Warning After $800 Billion Drop in Bitcoin and Crypto Market Values

Bitcoin and the broader cryptocurrency market have experienced a significant downturn amidst a general market slump, which could face an additional major challenge this week. Bitcoin’s value plummeted below $50,000 on Monday, though it has since recovered somewhat. In July, the price reached $70,000, fueled by enthusiasm over Donald Trump’s “game-changing” bitcoin plans. Since peaking in June, the total market value of bitcoin and other cryptocurrencies has dropped by approximately $800 billion.

Despite billionaire investor Mark Cuban’s bold bitcoin price forecast, David Duong, Coinbase’s head of institutional research, has warned of potential further volatility in bitcoin prices. In a blog post, Duong stated, “We anticipate that the current market fluctuations will continue short-term, but there could be a rebound in the near future if short positions are squeezed. However, don’t assume that this market disruption has ended.”

The crypto market’s decline began on Sunday, triggered by a sell-off in Japanese stocks due to the unwinding of the substantial Japanese yen carry trade. This carry trade, involving borrowing in a low-interest currency and investing in higher-yielding assets, began to unwind following the Bank of Japan’s recent interest rate hike. Kit Juckes from Societe Generale described it as “the biggest carry trade the world has ever seen” and questioned what comes next.

Duong noted that recession fears could grow in the coming weeks, predicting that this phase might continue until the Federal Reserve’s mid-September decision. He suggested that while the market might be turbulent in the third quarter, this pullback doesn’t signal the start of a new market cycle but aligns with their defensive stance for the quarter, with a more positive outlook for the fourth quarter.

In recent days, Bitcoin’s decline has been surpassed by some smaller cryptocurrencies, with the downturn expected to significantly impact many “altcoins.” Analysts from Bitfinex observed that the current negative sentiment is particularly harmful to altcoins, with many experiencing severe volatility and diminishing market capitalization. They warned that some altcoins might not survive the ongoing market correction.