The month of August has been unfavorable for Bitcoin and the broader cryptocurrency market, both of which have experienced significant losses. This stands in stark contrast to the global stock market, which has rebounded from a growth scare related to the US economy and is approaching record highs.

Bitcoin, the largest digital asset, has seen a 9% decline in August, while MSCI Inc.’s world share index has gained almost 1%. In addition, gold has reached all-time highs, and a Bloomberg global bond gauge has increased by nearly 2% during the same period.

Analysts have pointed out the risk posed by the potential disposal of Bitcoin seized by the US government, which is estimated to hold around $12 billion worth of cryptocurrency. Blockchain data reveals that last week, the US government transferred $600 million of confiscated Bitcoin to a wallet on the exchange operated by Coinbase Global Inc., according to an analysis conducted by Arkham Intelligence.

Khushboo Khullar, venture partner at Lightning Ventures, which invests in Bitcoin-linked firms, stated that possible US government sales are “resulting in this temporary downward price pressure.” She further added, “We expect this gap to close soon.”

The top 100 digital assets experienced their most significant decline on August 5th since November 2022, coinciding with a drop in equities due to US growth concerns and issues with the yen carry trade, affecting risk appetite on a global scale.

However, expectations for the US economy have stabilized with the release of reassuring data, and MSCI’s global share index is now just 1.5% below a record set in July. On the other hand, interest in crypto exposure has diminished. For instance, the funding rate for Bitcoin perpetual futures on the Binance exchange, the largest for digital assets, is the most negative it has been since 2022, according to CryptoQuant figures.

Bitcoin reached a record high of $73,798 in March due to bets on looser US monetary policy and increased inflows into dedicated US exchange-traded funds. However, interest in these ETFs declined in the months that followed. More recently, US politics has played a role in the token’s performance as both pro-crypto Republican Donald Trump and Democratic opponent Vice President Kamala Harris compete in the presidential race. Harris has yet to articulate a digital-asset policy stance.

As of 12:28 p.m. on Monday in New York, Bitcoin had decreased by 2% to trade at around $58,600, while other major tokens such as Ether and Solana were mostly lower. Despite the challenges, many maintain an optimistic outlook for the future trajectory of Bitcoin and the broader crypto market, believing that they will eventually rebound. The upcoming months will undoubtedly be pivotal in determining the fate of these digital assets against the backdrop of the ongoing global risk appetite recovery.

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