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The digital currency market was shaken, and investors' confidence was shaken.

Cryptocurrencies continued to be sold off fiercely on Monday. Bitcoin fell below $50,000 during the day, falling 16% at one point, and Ethereum fell as much as 23% during the day, marking the biggest drop since 2021.

Earlier this year, the U.S. Securities and Exchange Commission (SEC) approved the two major cryptocurrency spotETFWith the listing of the US and US presidential candidate Trump also expressing support for cryptocurrencies, Bitcoin is showing signs of decoupling from stock market fluctuations, and investors are gradually becoming optimistic about the prospects of Bitcoin.

According to data compiled by Bloomberg, two weeks ago, the 30-day correlation coefficient between Bitcoin and the MSCI World Stock Index was -0.2, which turned negative for the first time in four years, meaning that the Bitcoin market and global stock markets began to turn negatively correlated.

But this "optimistic narrative" was severely slapped in the face by yesterday's plunge. As recession concerns intensified and the sell-off in global stock markets intensified, the correlation between Bitcoin and global stock markets strengthened again, and geopolitical tensions also added fuel to investors' anxiety.

Yesterday alone, Bitcoin gave up almost half of its gains in the year, falling 20% ​​from its previous all-time high.

Rich Rosenblum, co-CEO and co-founder of digital asset investment firm GSR, commented:

“Every 1% drop in the market is a blow to investor confidence. For cryptocurrencies, since Bitcoin has the properties of a Veblen good (a good whose demand is proportional to its price),Confidence in it is more resilient than any other market in the world。”

The weak employment data has made the cryptocurrency market even worse.

Last week's non-farm data fell short of expectations, with the unemployment rate soaring to a nearly three-year high, triggering the recession indicator "Sam's Rule". Risk assets including cryptocurrencies suffered heavy losses, and the Bitcoin spot ETF suffered the largest capital outflow in nearly three months that day.

Virginie O'Shea, founder and CEO of Firebrand Research, said that holding Bitcoin as a strategic reserve is a "crazy idea":

“If you want a reserve asset, you need to look for something relatively stable in an unstable market, and cryptocurrencies are the opposite.”

Will the plunge continue?

Some people believe that Bitcoin may fall further.

Dessislava Aubert, senior analyst at data platform Kaiko, said:

“We may see further declines as market makers may reduce their exposure to avoid toxic flows, and we have observed similar declines in the top 10 altcoins.”

Aubert said that since the beginning of August, Bitcoin's 1% market depth (the average 24-hour trading volume within a 1% change in the current price) has fallen by more than 40% on major cryptocurrency exchanges such as Binance, Bybit, Bitfinex and Coinbase.Meaning that selling is eroding market liquidity.

But there are still industry insiders who are optimistic about the cryptocurrency market.

Zaheer Ebtikar, founder of cryptocurrency fund Split Capital, said:

“This is a transition, just like TradFi (traditional finance), (Bitcoin’s positioning) is transitioning from short-term derivatives to long-term holding.”