About 8% of Bitcoin’s value was wiped out in less than 10 minutes, sending crypto traders into a panic.
Reportedly, Elon Musk’s SpaceX is liquidating its Bitcoin holdings.
BTC
Some have speculated that the $26,218 holdings of some investors, the collapse of a Chinese property behemoth, and worries about interest rate hikes are to blame for Bitcoin’s bizarre price drop.
On August 18 at 9:35 pm UTC, the price of Bitcoin dropped by over 8% in less than 10 minutes, dragging the whole cryptocurrency market down with it and leaving many in the crypto world bewildered.
Several crypto market analysts have shared their initial views with Cointelegraph, however there appears to be no consensus as to why the markets abruptly collapsed.
Bitcoin sales at SpaceX, interest rate worries
According to EToro market analyst Josh Gilbert, SpaceX may have sold some or all of its $373 million in Bitcoin assets, which was reported in a Wall Street Journal article on August 17.
“Any time a prominent figure, especially one with as much clout as Elon Musk, is selling Bitcoin, it puts downward pressure on the price.”
The report was posted online, and the price reduction occurred about 2.5 hours later.
Gilbert said that a possible explanation for the sudden change in sentiment was the widespread anticipation among investors of future interest rate increases by the Federal Reserve in the United States.
“If we also consider some of the weaknesses we’ve seen across global markets — particularly risk assets — over the last few weeks with the expectation that rates will likely stay higher for longer, it was a recipe for a pullback,” Gilbert said.
“Bitcoin has struggled for a leg higher in the last month, trading in a tight range between $29k and $30k with little ‘good news’ to push the asset higher, which has only exuberated this sell-off,” he continued.
Yields on government bonds
A contrary viewpoint was presented by CMC Markets analyst Tina Teng, who blamed the recent increase in government bond yields for the sell-off.
Teng stated that falling market liquidity is often reflected in rising bond yields.
She suggested that this was the main reason cryptocurrency prices had dropped.
And while the Evergrande crisis may have had a secondary effect on Bitcoin’s value, Teng said she didn’t think it was a major factor. “This has more of an impact on sentiment towards the Chinese economy and investors,” she said.
Bitcoin is still vulnerable to the Chinese Yuan.
Matrixport Head of Research Markus Thielen suggested the fear of a Chinese Yuan depreciation may have played a substantial part in the sell-off, in contrast to Teng’s view that the Evergrande crisis was a major factor.
The Chinese Yuan’s current trading level represents the greatest macroeconomic risk since 2007.
“When China devalued the Yuan for the last time in August 2015, Bitcoin prices dropped by -23% in the two weeks that followed. After the devaluation, Bitcoin gained +59% for the year, as explained by Thielen.
Profitable whale sales
TheFlowHorse, a pseudonymous derivatives trader, told Cointelegraph that the abrupt drop could have been the consequence of a single large actor making a massive sale, which in turn resulted in increased pressure on derivatives, even though there were numerous other news events that could bore culpability.
It wasn’t an ordinary waterfall. Someone with clout and a plan bailed for a reason. Fewer criminals were spotted than usual.
Coinglass, a cryptocurrency analytics website, reports that in the four hours before to press time, Bitcoin long positions totaling over $427 million were liquidated. More than $822 million has been liquidated by traders who had long positions (a wager that the price of crypto assets would rise) over the past 24 hours.
Since rumours of the SEC signalling its approval of an Ethereum Futures ETF came seconds after the dump, Horse speculated that a significant fund may have offloaded their Bitcoin holdings to “trigger a cascade to buy ETH.” Horse called most of the explanations for the collapse “pure speculation.”
The Bitcoin price dropped below $26,000 for the first time in two months.
TradingView data showed that Bitcoin had gained 1.2% in two hours after the crash. Bitcoin was trading at $26,619 at the time of writing.
The rumour that the SEC is considering approving an Ethereum Futures ETF product as soon as October appears to have boosted its price.