The crypto market experienced a concentrated sell-off this week, a phenomenon rarely seen in recent years. Bitcoin and Ethereum both recorded their largest weekly declines since the FTX crash in November 2022, leading to a significant drop in the overall market capitalization of digital assets and a large-scale liquidation of leveraged positions.
The market value evaporated by approximately $390 billion in one week.
By the end of the week, Bitcoin had fallen 17.3% to just above $61,000, while Ethereum had dropped 22% to around $1,550. Although prices stabilized briefly on Saturday, both remained near their weekly lows.
According to TradingView data, the digital asset market lost approximately $390 billion this week, with its total market capitalization falling back to above $2 trillion, a significant contraction from its peak of nearly $4.2 trillion last October.
Leveraged long positions became the main losers.
Beyond the price decline, the derivatives market also saw significant deleveraging. CoinGlass data shows that approximately $7 billion in leveraged positions were liquidated in the digital asset market this week, of which about $5.7 billion were long positions. Monday and Friday were the two trading days with the most concentrated liquidations.
This means that funds that had bet on prices to continue rising were quickly squeezed out during the decline, further amplifying market volatility.
ETF outflows and macroeconomic expectations are putting pressure on the market.
This round of decline was not triggered by a single event, but rather by the accumulation of multiple negative factors in a short period of time. At the beginning of the week, publicly traded company Strategy disclosed its first sale of Bitcoin in nearly four years. Although the sale amounted to only 32 Bitcoins, or about $2.5 million, it still dampened some investors' expectations for continued buying.
The market then began to focus on whether Strategy might continue to sell Bitcoin to cover its obligations as the preferred stock financing expanded. This concern exacerbated market sentiment.
Meanwhile, Bitcoin spot ETFs have continued to see outflows. Vetle Lunde, head of research at K33 Research, previously stated that some of these outflows may reflect a shift of funds from crypto assets to AI-related investments.
AI security incidents and rising US Treasury yields exacerbate volatility.
Another noteworthy event this week came from Zcash. ZEC shares fell by over 40% after researchers discovered a serious vulnerability in the network privacy system using Anthropic's latest AI model. This incident also deepened market concerns about the security of some encryption protocols.
Stronger-than-expected U.S. jobs data released on Friday further weighed on risk assets. Following the data release, the market reassessed the Federal Reserve's policy path, with expectations for a rate cut this year weakening and even beginning to factor in the possibility of another rate hike given persistent inflation.
As a result, US Treasury yields rose, and the Nasdaq 100 index also saw a significant decline. With risk appetite cooling in traditional markets, crypto assets also came under pressure.
By the end of the weekend, with US stock markets closed, the market sell-off had temporarily slowed, and the prices of major crypto assets stabilized in the short term, but overall remained near the lows of the week.
