Bitcoin, the largest cryptocurrency in the world, has dropped considerably in the past 24 hours, leading to a ripple effect among other cryptocurrencies. On August 18, the price of BTC suddenly fell 8% within minutes as investor tension increased selling pressure.
Bitcoin has endured many crashes of this magnitude in the past, and market corrections of this magnitude do not come out of the blue. Thus, the recent decline in the value of BTC may be due to several factors in the crypto industry and the global economy. Here are some theories about the factors that may have exacerbated the recent crash.
SpaceX reportedly selling its Bitcoin holdings
SpaceX, Elon Musk’s aerospace company reportedly sold almost all of its Bitcoin holdings. SpaceX, alongside Tesla, was one of the few companies to buy Bitcoin during the 2021 bull run. According to reports, SpaceX had $373 million worth of Bitcoin on its balance sheet in 2021 and 2022, but has now sold the cryptocurrency.
While it’s unclear when and how SpaceX sold its Bitcoin holdings, the news appears to have sparked selling pressure from investors.
it’s funny how they sold last year or whatever is causing a crash now
— Shibetoshi Nakamoto (@BillyM2k) August 17, 2023
Fear of rate hikes by the Fed
The US is one of the largest markets for Bitcoin and recent revelations from the minutes of the July Federal Reserve meeting point to the possibility of another rate hike. The Fed controls interest rates in the US and when they raise rates it can have a significant impact on risky assets like BTC.
Higher interest rates lead to higher borrowing costs and higher returns on safe investments like bonds, which can discourage trading of risky leveraged positions within the crypto space.
BTC price suffers massive crash | Source: BTCUSD on TradingView.com
Futures liquidations and crypto whales selling big
Data from CoinGlass shows that the futures market has seen a wave of liquidations over the past 24 hours. The market witnessed the largest futures liquidation this year as BTC witnessed liquidations of $498.88 million.
The data suggests that most of the liquidated positions were longs, meaning traders were betting that Bitcoin’s price would rise. In the past 24 hours, total liquidations totaled $1.04 billion, of which $308.89 million and $27.56 million also came from ETH and XRP liquidations.
The Coinbase premium is up by +3% implying some whales are dumping BTC on Binance. And when crypto whales sell large amounts of BTC, it can flood the market and drive the price down further.
Bankrupt Chinese real estate giant
China Evergrande, China’s second largest real estate developer, recently filed for bankruptcy from the US. This appears to have had a knock-on effect on Bitcoin’s price, as the bankruptcy news came on the eve of its recent decline.
Do you think this is for fear of evergrande and a domino effect or what could we miss?
— besadam.lens (@besada_m) August 17, 2023
Does this signal a new wave of long-term bearish sentiment for Bitcoin?
When Bitcoin crashes, it often brings the rest of the crypto market with it. As such, Bitcoin’s recent outage has also led to a fall in the price of other cryptocurrencies. Data from Coinmarketcap shows that Bitcoin is currently down 7.06% in the past 24 hours. Major altcoin ETH, BNB and XRP are also down 5.77%, 5.19% and 13.20% respectively.
Bitcoin has had a few volatile months and has struggled to cross $30,000 this year. Nevertheless, the price could rise again soon, especially if the SEC approves the most recent filings for Spot Bitcoin ETFs.
Featured image from iStock, chart from TradingView.com