Here are 5 reasons Bitcoin dropped – SpaceX isn’t to blame for this crypto bloodbath

In this post:

  • Bitcoin prices plummeted late Thursday after claims of hundreds of millions in sales, causing a slaughter in futures and spot markets. Is this another crypto winter?
  • There are news reports that the SEC could approve ETH features ETFs, and this has slightly affected the BTC market recovery.
  • Analysts point out that the crypto market has been flat for a while now and a shakeup was expected at any time.

Elon Musk’s SpaceX apparently selling its Bitcoin holdings, the bankruptcy of a Chinese property behemoth, and concerns about interest rate hikes are among the hypotheses put forward to explain Bitcoin’s unexpected price drop. An unexpected and significant sell-off in crypto markets startled what had been an otherwise dull few weeks for crypto, and the sensation was likely shared globally among traders and crypto enthusiasts.

Bitcoin ushers in a crypto bear market

As reported by Cryptopolitan, Bitcoin fell sharply in the last 12 hours ushering in what could be the start of a bear market. According to market charts from TradingView, BTC sits at $26.5k. 

According to CoinGecko, the global crypto market cap sits at $1.11 Trillion, a -5.76% change in the last 24 hours and a -4.96% change one year ago. As of today, BTC’s market cap is at $517 Billion, representing a Bitcoin dominance of 46.61%. Meanwhile, Stablecoins’ market cap is at $124 Billion and has an 11.22% share of the total crypto market cap.

Bitcoin fell sharply on Thursday as traders sold the tokens in large numbers in response to a number of unrelated events, forcing the crypto markets to lose 6.7% of their total capitalization, one of the largest dips in recent months.

In the last 24 hours, Bitcoin has dropped as much as 9% to $25,000 from $28,500 on Binance, sparking a market-wide drop that has driven important tokens such as litecoin (LTC) down by 14%. This resulted in the liquidation of more than $1 billion in crypto futures, a 14-month high. But why is this so?

1. Whales selling big

Despite the fact that there were many other news events that may have contributed to the abrupt decline, some market analysts assert that it may have been the result of a single large actor selling a substantial amount of derivatives.

In the four hours prior to publication, more than $427 million in Bitcoin long positions were liquidated, according to data from the crypto analytics platform Coinglass. Over the course of the last twenty-four hours, speculators with open long positions (a bet that the price of crypto assets will rise) liquidated more than $822 million.

In the past 24 hours, 177,024 traders were liquidated, totaling $1.04 billion in liquidations.

Bitcoin has recovered slightly since this bloodbath. Its price appears to have risen in response to news that the SEC may consider approving an Ethereum Futures ETF product as soon as October.

2. Chines Yuan remains a risk to crypto

The risk of a Chinese Yuan devaluation, according to crypto market analysts, may have played a significant role in the sell-off. The greatest macroeconomic risk is a potential devaluation of the Chinese Yuan, which is trading at its weakest level since 2007.

During the two weeks following the final devaluation of the Yuan by China in August 2015, Bitcoin prices dropped by -23%. Prior to the commencement of a more significant rally, Bitcoin ended the year +59% above its devaluation level.

3. Some blame SpaceX

Some pointed to SpaceX’s alleged bitcoin sales – an unconfirmed assertion – while others suggested China Evergrande’s bankruptcy had something to do with the slide. However, neither of these occurrences is likely to have influenced prices.

According to the WSJ, SpaceX simply wrote down the value of their bitcoin assets. Among accountants, this is the decline in an asset’s book value when its fair market value falls below the book value.

Asset write-downs are prevalent in corporations since they reduce the tax value of any holdings. SpaceX had not confirmed or reported any sales of its bitcoin holdings as of Friday morning Asian time. As a result, it is uncertain how much bitcoin or crypto the Elon Musk-owned corporation possesses.

Crypto analysts argue SpaceX is not to blame

Professional traders believe that market structure and liquidations, rather than a single fundamental cause, were to blame for the abrupt collapse. The market has also been relatively illiquid and flat, allowing for unexpected fluctuations.

In a flat market, the rapid accumulation of a large number of futures positions might lead prices to collapse swiftly in the case of a substantial sell-off by an influential player.

Because as prices fall, long traders must sell their positions to avoid being liquidated, increasing selling pressure while producing an infinite loop of falling prices and long position coverage.

According to data, the majority of long liquidations took place on the crypto exchange OKX, accounting for approximately 40% of the whole market.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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