Top token Bitcoin traded 11% lower at $52,680 as of 8:39 a.m. in London, adding to a 13.1% drop last week that was the worst since the period when the FTX exchange imploded. Ether shed over a fifth of its value before paring some of the slide to change hands at $2,342. Most major coins nursed losses. 

The declines come as a global stock selloff intensifies, reflecting concerns about the economic outlook and questions over whether heavy investment into artificial intelligence will live up to the hype surrounding the technology. Geopolitical tension is rising in the Middle East, adding to investor skittishness.

US exchange-traded funds for Bitcoin suffered their largest outflows in about three months on Aug. 2. One question is whether the products will attract dip buyers when they resume trading, or witness a deeper efflux.

Carry Trade

Digital assets are a victim in part of the unwinding yen carry trade, as speculators adjust to higher interest rates in Japan, according to Hayden Hughes, head of crypto investments at family office Evergreen Growth.

“Those investors are also fighting a drastic increase in hedging costs based on the volatility in the US dollar-Japanese yen trading pair,” Hughes said.

Bitcoin has been buffeted by a range of factors since hitting a record of $73,798 in March. That includes US political flux as pro-crypto Republican Donald Trump and Democratic opponent Vice President Kamala Harris — who has yet to detail a digital-asset policy stance — lock horns in the presidential race.

Also hanging over the market are possible sales of Bitcoin seized by governments and the risk of a supply overhang from tokens returned to creditors through bankruptcy proceedings.

Fed Outlook

Bond traders have amplified bets on US interest-rate cuts beginning in September to support economic expansion. The prospect of less restrictive monetary policy is actually “a good thing for crypto,” argued Sean Farrell, head of digital-asset strategy at Fundstrat Global Advisors LLC.

The Bitcoin retreat at its nadir Monday left the token at levels last seen in February. Ether, meanwhile, earlier fell back to prices previously seen at the turn of the year. Similar to Bitcoin, one unknown is how investors in new US spot-Ether ETFs will react.

Justin D’Anethan, head of Asia-Pacific business development at market maker Keyrock, said the crypto rout appeared somewhat Ether-led, flagging social-media rumors of institutional-selling of Ether-related assets.

About $900 million of bullish crypto positions were liquidated in the past 24 hours, Coinglass data show, a sign of leveraged bets coming unstuck.

Khushboo Khullar, a venture partner at Lightning Ventures, which invests in Bitcoin-linked companies, said the broad stock slump had caused some “panic,” spurring investors to rush for liquidity to settle margin calls. She argued the crypto retreat is a “fine buying opportunity.”

Bitcoin’s year-to-date advance has moderated to approximately 21%, compared with an 18% climb in gold and an 8% jump in a gauge of global stocks.