Early August 2024 has been marked by a major sell-off across the markets, with stocks and cryptocurrencies wiping billions of dollars of value within hours.

Few assets have been as active or as dramatic as Bitcoin (BTC), the world’s premier cryptocurrency, which has, after briefly promising to regain its annual and all-time highs (ATH) above $73,000, rapidly plunged through several consecutive support levels.

In fact, in the small hours of Monday, August 5, BTC even briefly crashed below $50,000, though such a level seemingly appeared too enticing for investors to miss out on, and the buying pressure the plunge created proved sufficient for the coin to rise to $52,994 by the time of publication.

Why is Bitcoin plunging?

As was the case in the previous Bitcoin collapses of recent months, there have been multiple theories as to what has been the driving force behind the collapse. Still, unlike the other recent plunge, BTC has fallen even lower, breaking below $56,000 and there is no singular major event such as the German government selling seized cryptocurrency to blame.

Indeed, it is likely a mix of factors that caused the selloff, including the recent employment report, spillover effects from the stock market, which has itself seen a substantial drop during the latest full trading day and during the extended session, and the general persistent and recently-heightened recessionary fears.

Some prominent figures within the industry have, however, speculated there may be other reasons behind the ongoing crypto market bloodbath. Arthur Hayes, for example, recently stated on X that his sources in the world of traditional finance tell him that a major institutional player is in trouble and is linked to the selloff.

How bad can the crypto bloodbath get?

Whatever the reason – or the cocktail of reasons – behind the crypto market wipe may be, the fact remains that nearly $400 billion has been erased from the total market capitalization of digital assets and that Bitcoin appears to be struggling to hold on to its psychologically-important $1 trillion valuation.

Indeed, though BTC has so far evaded a collapse below $50,000, it is worth remembering that recent days have seen multiple events in which the coin’s price would briefly plunge below a critical support level only to recover somewhat before plunging even deeper toward a lower key zone

The next level Bitcoin is likely to find some support at – should it truly plunge under $50,000 – will be near $47,000 since nearly 1 million addresses purchased almost half a million BTC close to that price.

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