Elon Musk’s SpaceX is reportedly selling its Bitcoin holdings, contributing to the recent price dip in the cryptocurrency market. On August 18, around 9:35 pm UTC, the price of Bitcoin plummeted over 8% in just 10 minutes, leaving many in the crypto community puzzled.
While there is no definitive explanation for the sudden drop, several crypto market analysts have shared their theories. Josh Gilbert, a market analyst at eToro, pointed to a report suggesting that SpaceX may have offloaded its $373 million worth of Bitcoin holdings. Gilbert believes that the involvement of a prominent industry figure like Elon Musk in selling Bitcoin could have put pressure on the price. The drop occurred approximately 2.5 hours after the report was published.
Another theory proposed by Gilbert is that the broader markets’ anticipation of future interest rate hikes by the U.S. Federal Reserve could have influenced the sell-off. With global markets experiencing weaknesses and expectations that rates will remain higher for longer, it created an environment for a market pullback. Gilbert also noted that Bitcoin has struggled to break out of its trading range between $29k and $30k over the past month, lacking positive news to drive its price higher.
Tina Teng, a market analyst from CMC Markets, had a different perspective. She attributed the sell-off to the recent rise in government bond yields, which typically indicates reduced liquidity in the broader market. Teng stated that this reduction in liquidity could have affected cryptocurrencies, causing the price decline. She also dismissed the notion that the bankruptcy of Chinese property giant Evergrande directly impacted Bitcoin’s price, stating that it primarily affected sentiment towards the Chinese economy.
However, Markus Thielen, Matrixport’s Head of Research, argued that the risk of a Chinese Yuan devaluation could have played a significant role in the sell-off. He emphasized that the Chinese Yuan is currently trading at its weakest level since 2007. Thielen pointed to historical data, citing a 23% decline in Bitcoin’s price following the devaluation in August 2015. He believes that the fear of a similar devaluation may have prompted investors to sell their Bitcoin holdings.
Another factor that likely contributed to the price drop was a significant sell-off by a large market participant or “whale.” The pseudonymous derivatives trader, TheFlowHorse, suggested that a large actor initiated the sell-off, which then triggered further pressure on derivatives. Data from the crypto analytics platform Coinglass revealed that more than $427 million worth of Bitcoin long positions were liquidated within a four-hour period. In the last 24 hours, over $822 million in liquidations occurred for traders with open long positions.
Despite the decline, Bitcoin experienced a slight recovery, gaining 1.2% in two hours following the crash. The price was around $26,619 at the time of publication. This recovery may have been driven by the news that the U.S. Securities and Exchange Commission (SEC) is considering approving an Ethereum Futures Exchange-Traded Fund (ETF) product as early as October. The prospect of an Ethereum ETF approval may have contributed to renewed optimism among investors.
In conclusion, the recent price dip in Bitcoin and the broader cryptocurrency market has been attributed to SpaceX selling its Bitcoin holdings, fears of interest rate hikes, rising government bond yields, the risk of Chinese Yuan devaluation, and a significant sell-off by a market participant. While the exact cause remains uncertain, these factors have contributed to the market’s volatility and left many observers speculating about the future of Bitcoin.
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