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Reports indicate that Elon Musk’s SpaceX is selling its Bitcoin (BTC) assets, alongside the bankruptcy of a major Chinese property firm and concerns regarding potential interest rate increases, which have been suggested as reasons for Bitcoin’s unexpected price drop.
On August 18 at approximately 9:35 pm UTC, Bitcoin’s value abruptly fell by over 8% within just 10 minutes, dragging down the broader cryptocurrency market and leaving many in the crypto community puzzled.
the fuck was that? pic.twitter.com/Lh2zGXv29n
— Molly White (@molly0xFFF) August 17, 2023
Although there is no clear agreement on the cause of the sudden market decline, various crypto market analysts have shared their preliminary insights with Cointelegraph.
SpaceX sells Bitcoin, interest rate concerns
eToro market analyst Josh Gilbert attributed the drop to a report suggesting that SpaceX might have sold some or all of its $373 million in Bitcoin holdings, as detailed in an article from the Wall Street Journal on August 17.
“Whenever a prominent figure in the industry sells Bitcoin, particularly someone as significant as Elon Musk, it will exert downward pressure on the price.”
This price drop occurred roughly 2.5 hours after the report was made public.
Gilbert also noted that another possible explanation could be the swift change in market sentiment, driven by expectations of future interest rate hikes from the U.S. Federal Reserve.
“Considering the weaknesses observed in global markets—especially in risk assets—over the past few weeks, with the anticipation that rates will likely remain elevated for an extended period, it created a scenario conducive to a pullback,” Gilbert elaborated.
“Bitcoin has faced challenges in gaining upward momentum over the last month, fluctuating within a narrow range of $29k to $30k, with minimal positive news to drive the asset higher, which has only intensified this sell-off,” he added.
Government bond yields
Tina Teng, a market analyst at CMC Markets, offered a different perspective, pointing to the recent increase in government bond yields as a key factor behind the sell-off.
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Teng explained that rising bond yields generally indicate a decrease in liquidity across the broader market.
“This could be the main reason cryptocurrencies experienced a decline,” she stated.
Furthermore, Teng mentioned that while the Evergrande crisis might have an indirect effect on Bitcoin’s price, she did not consider it a primary cause of the downturn. “This has more of an impact on sentiment regarding the Chinese economy and investors,” she clarified.
Whale’s significant selling
While numerous other news events could be implicated, pseudonymous derivatives trader @TheFlowHorse informed Cointelegraph that the abrupt downward movement might have stemmed from a single large entity executing a significant sell order, which subsequently exerted additional pressure on derivatives.
“It was not merely a natural cascade. A major player exited for a reason and initiated the movement. Spot volume was minimal compared to perpetual contracts.”
Data from the crypto analytics platform Coinglass revealed that over $427 million in Bitcoin long positions were liquidated in the last four hours. In the past 24 hours, liquidations for traders holding open long positions exceeded $822 million—a wager that the prices of crypto assets would rise.
More than $427 million worth of Bitcoin long positions have been liquidated in the last 24 hours. Source: Coinglass
Describing many of the explanations for the decline as “pure speculation,” Horse suggested that since reports of the SEC hinting at the approval of an Ethereum Futures ETF emerged shortly after the drop, a large fund may have liquidated its Bitcoin position to “trigger a cascade to buy ETH.”
Related: Bitcoin price briefly dips below $26K, falling to two-month lows
Bitcoin has seen a slight recovery since the crash, rising by 1.2% in the last two hours, according to data from TradingView. At the time of publication, Bitcoin is trading at $26,619.
The price appears to have been supported by news that the SEC may consider approving an Ethereum Futures ETF product as early as October.
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