The cryptocurrency market experienced a sharp downturn on August 5, as Ethereum plunged to a low of $2,111 and Bitcoin briefly dipped below the $50,000 mark. The sudden volatility triggered widespread liquidations, with over $382 million** wiped out in just one hour and more than **$1 billion in total positions liquidated across exchanges throughout the day.
According to Parsec data, DeFi lending protocols saw over $320 million** in collateral liquidations in the past 24 hours — a yearly high. Of this, **$187 million came from ETH-backed loans, $77.9 million** from wstETH, and **$32.5 million from wBTC. As traders rushed to cover their positions, over-the-counter (OTC) prices for Bitcoin temporarily spiked to 7.97 yuan per dollar, reflecting intense buying pressure in certain markets.
Despite rumors circulating about leveraged positions being forcibly closed, Tron founder Justin Sun denied involvement, stating he rarely engages in leveraged trading strategies. However, data from Spot On Chain reveals that his investment portfolio lost approximately $280 million** due to Ethereum's 20% drop. Since February 8, 2024, Sun has acquired **377,590 ETH** at an estimated average price of **$3,051, totaling around $1.15 billion in purchases.
Interestingly, an address linked to Sun’s team — 0x5ac...a17e — withdrew 38 million USDT from HTX three hours before the crash and used 37 million USDT to buy 16,236 ETH at an average price of $2,279. Analyst @EmberCN pointed out several behavioral patterns suggesting the wallet's affiliation: prior large USDT deposits into HTX, withdrawal scale consistency, and similarity in transaction behavior with known Sun-affiliated addresses.
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Possible Causes Behind the Market Downturn
While no single factor can fully explain the crash, several interconnected events may have contributed to the sell-off.
Global Equity Markets Under Pressure
Markets opened sharply lower on Monday, with Japan’s Nikkei 225 and Topix Index both dropping nearly 7%, pushing them close to bear market territory — down almost 20% from their July 11 highs. This followed a weak U.S. jobs report on Friday, which raised concerns about an impending economic slowdown.
The ripple effect hit risk assets globally, including cryptocurrencies. As equities declined, investors began de-risking across asset classes, leading to broad-based selling.
Additionally, speculation grew that the Bank of Japan might be tightening monetary policy, ending years of ultra-low interest rates that fueled yen carry trades. When these trades unwind, traders sell higher-yielding assets (like crypto and tech stocks) denominated in dollars and repurchase yen to repay debts — creating downward pressure on global markets.
Jump Trading’s Large-Scale wstETH Redemption
Another major factor could be the ongoing redemption activity by Jump Trading, a prominent algorithmic trading firm. Over the past nine days since July 25, Jump has converted 83,000 wstETH into 97,500 ETH, with 66,000 ETH (worth $191.4 million) already transferred to centralized exchanges like Binance and OKX.
In the last 24 hours alone, Jump moved a net 17,576 ETH ($46.78 million)** to CEXs. They still hold **37.6K wstETH ($101M) and 11.5K STETH ($26.3M) in the process of unstaking via Lido Finance.
Such large inflows into exchanges often precede selling pressure, as assets become available for immediate trade. While not confirmed as intentional dumping, the timing and volume likely exacerbated downward momentum during a fragile market phase.
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Lack of ETF Inflows Adds Bearish Sentiment
Unlike Bitcoin ETFs, which have seen consistent inflows post-approval, Ethereum spot ETFs have struggled to attract sustained investment. On August 2 alone, Ethereum ETFs recorded a net outflow of $54.27 million**. The Grayscale Ethereum Trust (**ETHE**) saw outflows of **$61.43 million, bringing its total historical outflows to $2.117 billion.
Currently, Ethereum ETFs hold $8.332 billion** in assets under management (AUM), representing **2.29%** of Ethereum’s total market cap. Cumulative net outflows now stand at **$511 million, indicating weak institutional demand despite regulatory approval.
Without strong ETF inflows to absorb selling pressure, any negative sentiment or macro shock can quickly tip the market into a downward spiral.
Market Recovery Amid Stronger-Than-Expected U.S. Data
Despite the morning panic, markets rebounded sharply after the release of key U.S. economic data. On Monday evening, the ISM Non-Manufacturing PMI for July came in at 51.4, above expectations of 51.0 and a significant jump from the previous 48.8. The reading signals expansion in the services sector — the backbone of the U.S. economy — countering fears of an imminent recession.
As confidence returned, both traditional and digital assets rallied. Bitcoin recovered above $51,000, while Ethereum rebounded toward $2,300.
This swift reversal highlights how tightly crypto markets are now linked to macroeconomic indicators — especially those influencing Fed rate policy expectations.
Frequently Asked Questions (FAQ)
Q: Was Justin Sun’s position liquidated during the crash?
A: No official liquidation occurred. Sun denied using high leverage and clarified he rarely participates in margin trading. However, his unrealized portfolio value dropped by about $280 million due to falling ETH prices.
Q: Why did OTC Bitcoin prices spike during the crash?
A: As traders faced margin calls, demand for immediate liquidity surged in peer-to-peer and OTC markets. This caused temporary price dislocations where BTC traded at a premium in some regions.
Q: How do wstETH redemptions affect Ethereum’s price?
A: When staked ETH tokens like wstETH are redeemed for liquid ETH and sent to exchanges, it increases sell-side pressure. If done at scale — especially during volatile periods — it can trigger or worsen price declines.
Q: Are Ethereum ETFs failing?
A: Not necessarily failing, but underperforming compared to Bitcoin ETFs. Persistent outflows suggest cautious investor sentiment, possibly due to regulatory uncertainty or lower yield appeal post-Dencun upgrade.
Q: Can yen carry trade unwinds impact crypto?
A: Yes. When interest rates rise in Japan, investors close carry trades by selling foreign assets (including crypto) and buying back yen. This has historically led to synchronized drops across risk-on assets.
Q: What should traders watch for next?
A: Key indicators include ETF flow trends, large wallet movements (especially from whales or institutions like Jump), macroeconomic data (like CPI or employment reports), and global equity market performance.
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Conclusion
The August 5 crypto selloff was likely driven by a confluence of factors: global equity weakness, potential shifts in Japanese monetary policy, large institutional movements (such as Jump Trading’s redemptions), and lackluster demand for Ethereum ETFs. While short-term panic caused significant liquidations, the quick rebound following strong U.S. economic data shows growing resilience in the market.
For investors, this event underscores the importance of monitoring both on-chain activity and macro fundamentals. As crypto becomes increasingly integrated with traditional finance, understanding cross-market dynamics is no longer optional — it's essential.
Core Keywords: Ethereum crash, Bitcoin price drop, ETF outflows, Jump Trading wstETH redemption, ISM PMI data impact, DeFi liquidations, macroeconomic influence on crypto