After an excellent performance last week, with Bitcoin and Ethereum prices showing double-digit price growth, cryptocurrency markets are facing mounting bearish momentum this Tuesday, with Bitcoin’s price struggling to hold current support levels of $21k. Ethereum shows increased volatility with even more substantial price declines of 8% in the past 24 hours. What’s causing the recent drop in crypto prices? Let’s find out.
Key Points:
- Global cryptocurrency market capitalization falls below $1 trillion.
- Bitcoin’s price struggles to hold support at $21k, likely to fall to $20k.
- Ethereum’s “merge trade” hype is slowing down with declining trading volume.
- Tesla records a $175 million impairment charge for its sale of digital assets, dispelling rumors of a “wash trade.”
Global Cryptocurrency Market Capitalization Drops Below $1 Trillion
One reason for today’s decline in both Bitcoin and Ethereum prices and the increase in bearish momentum is that the global cryptocurrency market cap dropped below the $1 trillion level.
1M Market Cap // Source: CoinMarketCap
According to data from CoinMarketCap, this is the first time in ten days that we’re seeing crypto’s overall valuation drop below the emotional and technical $1 trillion level.
As mentioned in our previous Bitcoin price and news article on July 24th:
“Moreover, the global cryptocurrency market cap must stay above $1 trillion for Bitcoin to remain above the current support levels.”
With the global market capitalization falling below $1 trillion, investor uncertainty increased substantially, especially for those newer traders who bought cryptocurrency in the past week.
Bitcoin Price Down, Trading Volume Up
While Bitcoin’s price is showing a decline in value, the good news is that the 24-hour trading volume for BTCUSD increased substantially, up over 33% in the past 24 hours. In addition, it seems that Ethereum’s market is losing momentum because ETHUSD is trading at $1,389, down over 9% in the past 24 hours and its trading volume only showed an increase of 6.57% in the past 24 hours.
The increase in trading volume is a positive sign since that suggests that the crypto market has plenty of momentum, despite declining prices.
While Ethereum was leading the bull market last week, the “merge trade” hype is slowing down. Moreover, with the conclusion of the EthCC conference last week, Bitcoin is again taking the lead in crypto markets.
Regarding relevant Bitcoin news, after announcing last week in its Q2 Earnings report that Tesla sold more than 75% of its cryptocurrency last quarter, the company also revealed that it recorded a $175 million impairment charge for its sale of cryptocurrency.
An impairment charge is an expense in a company’s books that signifies a substantial decline in the carrying value of a specific asset on a balance sheet. While there have been rumors about Tesla’s Bitcoin sale being a “wash trade” to help offset some of its capital gains, taking an impairment charge is not tax-deductible since the tax code doesn’t allow impairment as a deductible expense.
It’s unclear why Tesla decided to cut their losses with Bitcoin and sell off more than 75% of its holdings. Still, the news has undoubtedly created negative pressure on the market and likely contributed to the short-term decline in Bitcoin prices.
Bitcoin is trading at $21k, struggling to hold current support levels. Its market cap remains above $400 billion, with a 24-hour trading volume of $38 billion.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any digital assets.
Follow us on Twitter @themerklehash to stay updated with the latest Crypto, NFT, AI, Cybersecurity, and Metaverse news!
Image Source: actiongp/123RF
