Bitcoin Drop Driven By US Trade Deficit, China Banks

Key takeaways:

• Rising US trade deficits, insider stock sales, and weak Chinese banks heightened global investor caution.

• Whales and miners keep selling Bitcoin, but macroeconomic weakness remains the dominant driver.

Bitcoin (BTC) dropped to its lowest level in 50 days, below $108,000. The sharp decline caught traders off guard and triggered $137 million in liquidations of leveraged bullish positions. The move came after a 1.2% pullback in the tech-heavy Nasdaq 100 index, driven by growing doubts about the sustainability of artificial intelligence sector growth.

Market participants are now weighing whether Bitcoin’s downturn reflects broader macroeconomic pressures or is limited to the cryptocurrency.

Investor caution intensified after the United States reported a 22% increase in the trade deficit for July. Imports surpassed exports by $103.6 billion, widening the gap more than economists had forecast. Reuters noted that trade “could be a major drag on economic growth in the third quarter.”

Major insider sales and Chinese banks’ rising bad debt heighten risk

X user Malone_Wealth pointed out that the top 200 stock trades by executives, directors, and major shareholders last week were all sales, something he described as unprecedented in his lifetime. Insider activity is typically monitored through filings with the US Securities and Exchange Commission.

Prominent transactions included a planned $961 million sale by Walmart’s Jim C. Walton, $164 million from Snowflake’s Frank Slootman, and $160 million from Amer Sports’ Dennis J. Wilson. Other large moves came from Dutch Bros’ Travis Boersma at $81.5 million and Klaviyo’s Andrew Bialecki at $73.7 million.

Additional concerns emerged from China after the country’s five largest lenders reported record-low margins and rising delinquencies, according to the Financial Times. Chinese retail banks disposed of $5.2 billion in bad debt during the first quarter, an eightfold increase from a year earlier, based on figures from the Banking Credit Asset Registration and Transfer Center.

AI sector worries deepen as Nvidia and SMCI stocks decline

The AI sector has also become a growing source of unease. Nvidia (NVDA) reportedly revealed that 44% of its data center revenue came from just two clients. Despite strong quarterly results on Wednesday and third-quarter revenue guidance in line with expectations, NVDA shares fell 4.7% over two trading sessions.

Meanwhile, Super Micro Computer (SMCI) warned on Thursday that weaknesses in its financial reporting could undermine its ability to release results. The $25 billion company, a key Nvidia partner supplying high-performance AI servers and data center infrastructure, saw its stock decline 5.1% on Friday.

Related: Bitcoin trend reversal to $118K or another drop to $105K–Which comes first?

Signs of risk aversion were also evident in the bond market. Demand for US Treasurys drove the 2-year yield down to 3.62%, its lowest level in four months and well below 3.80% just a week earlier. Investors’ willingness to accept lower returns despite persistent inflation suggests a growing preference for safety.

Recent Bitcoin sales by long-dormant whales and steady miner outflows have added to the negative tone. Still, the main driver of BTC’s latest decline remains the weakening macroeconomic outlook, with many traders opting to reduce exposure ahead of Monday’s US national holiday.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.