The cryptocurrency market declined by 2.17% over 24 hours, continuing a weekly decline of 4.7% despite achieving a monthly gain of 11%. The main factors behind this decline over 24 hours are:
Institutional withdrawal from ETH – Fidelity transferred $54 million worth of ETH to Coinbase, and BlackRock's ETF saw outflows of $375 million.
Tendency to reduce risk – $223 million left cryptocurrency products last week, marking the first net outflow in 15 weeks.
Liquidation of leveraged positions – the open interest in perpetual contracts rose by 20.7% to $834 billion, increasing downward pressure.
Detailed analysis
1. Institutional selling of ETH (negative impact)
Overview: Fidelity moved 14,978 units of ETH (worth $54 million) to Coinbase on August 5, after BlackRock's ETH spot fund lost $375 million in a single day. These moves indicate profit-taking after ETH rose by 30% in July.
What it means: Large movements of ETH by institutions usually precede market volatility – observers are waiting to see if these moves will lead to a broader liquidation in other cryptocurrencies.
Watchpoint: ETH support level at $3,500. Breaking this level could lead to a drop in other cryptocurrencies by 10-15%.
2. Risk aversion due to macroeconomic factors (mixed impact)
Overview: The correlation of cryptocurrencies with the Nasdaq-100 reached 0.87 over 24 hours, as traders priced in the likelihood of monetary policy tightening by the Federal Reserve. However, BTC spot funds saw inflows of $18 million on August 5, which limited the losses.
What it means: Traders have considered cryptocurrencies as risk assets amid rising Treasury bond yields, but Bitcoin's dominance at 60.9% shows relative resilience.
Watchpoint: Minutes from the Federal Open Market Committee meeting on August 6 and the U.S. jobs report on Friday – stronger data could increase the pullback in cryptocurrencies.
3. Increased derivatives activity (negative impact)
Overview: Open interest in perpetual contracts increased by 20.8% to $783 billion, with long liquidations rising by 901% over 24 hours. Additionally, funding rates turned positive (+0.0066%), which could put pressure on short positions.
What it means: Leveraged long positions intensified selling – Bitcoin positions worth $57.8 million were liquidated, mostly long positions.
Watchpoint: Continued rise in funding rates above +0.01% – a classic signal for a long position trap.
Summary
The current pullback combines institutional profit-taking in ETH, risk-reduction flows due to economic factors, and increased derivatives activity – but Bitcoin's dominance indicates that this is a healthy correction for other cryptocurrencies and not the beginning of a structural bear market. Watch the ETH support level at $3,500 and Friday's job data to see if the pullback continues. Will other cryptocurrencies stabilize if Bitcoin maintains support at $115,000?
