Cryptocurrency Market Declines Amid Recession Fears and Token Unlocks

Cryptocurrency Market Faces Downward Pressure Amid Recession Fears

As concerns about a looming recession grow, cryptocurrencies are experiencing a downward trend, significantly impacting risk assets ahead of the crucial jobs data report scheduled for Friday. Bitcoin (BTC) experienced a notable decline, dropping over 4% at one point on Thursday. However, it managed to recover slightly, trading at approximately $56,500 at the time of this report, representing a decrease of 2.2% over the last 24 hours. Ethereum’s ether (ETH) also saw a drop of more than 4%, falling below the $2,400 mark.

The broader cryptocurrency market, represented by the CoinDesk 20 Index, faced a setback, decreasing by more than 3%. Interestingly, some altcoins, including dogecoin (DOGE), cardano (ADA), and litecoin (LTC), showed stronger performance compared to their peers.

In a more specific downturn, the native token of the layer-1 blockchain Aptos (APT) plunged by 7%, marking it as the largest loser among the CoinDesk 20 constituents. This decline is largely attributed to an impending token unlock event, which is expected to flood the market with new supply. According to Token.Unlocks data, approximately $65 million worth of locked tokens, accounting for 2.3% of the current supply, will be released into circulation next week, impacting early investors significantly.

A recent analysis by Messari revealed that cryptocurrencies have historically underperformed the broader market during a seven-day window before and after significant token unlocks, based on the examination of hundreds of such events in previous years.

Traditional Markets Reflect Risk-Off Sentiment

Shifting the focus to traditional markets, key U.S. equities experienced declines during the morning session, reflecting a broader risk-off sentiment among investors. The Dow Jones Industrial Average (DJIA) was down by 0.9%, while the S&P 500, a broader index, saw a loss of 0.5% by 12:00 PM Eastern Time. Meanwhile, the tech-heavy Nasdaq 100 managed to erase its initial gains and remained mostly flat.

Crypto-focused stocks mirrored this negative sentiment. Coinbase (COIN), a major player in the cryptocurrency exchange arena, dropped 1%, briefly falling below the $160 threshold for the first time since February. This decline marked a significant dip, surpassing the lows witnessed during the early August crash, which was primarily driven by the unwinding of the Japanese yen carry trade. Additionally, large-cap bitcoin miners such as Marathon (MARA) and Riot Platforms (RIOT) also struggled, recording declines of 4% and 2%, respectively.