Bitcoin, the largest cryptocurrency in the world, has plummeted substantially in the past 24 hours, leading to a ripple effect among other cryptocurrencies. On August 18, the price of BTC suddenly dumped 8% in a matter of minutes, as tension from investors increased selling pressure.
Bitcoin has endured many crashes of this magnitude in the past, and market corrections of this magnitude don’t come out of nowhere. So the recent plunge in BTC’s value could 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 Sells Off Its Bitcoin Holdings
SpaceX, Elon Musk’s aerospace company, had reportedly sold off nearly all of its Bitcoin holdings. SpaceX, in addition to Tesla, was one of a few companies that bought Bitcoin during the bull run in 2021. According to reports, SpaceX held $373 million worth of Bitcoin on its balance sheet in 2021 and 2022 but has now sold the cryptocurrency.
Although it’s unclear when and how SpaceX sold its Bitcoin holdings, the news seems to have triggered selling pressure from investors.
it’s funny how them selling last year or whatever causes a crash now
— Shibetoshi Nakamoto (@BillyM2k) August 17, 2023
Fears Of Interest Rate Hikes By The Fed
The US is one of the biggest markets for Bitcoin and recent revelations from the minutes of the Federal Reserve’s July meeting hint at the possibility of another increase in interest rates. The Fed controls interest rates in the US, and when they hike rates, it can have a significant impact on risky assets like BTC.
Higher interest rates lead to increased borrowing costs and higher returns on safe investments like bonds, which may discourage trading in 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 flurry of liquidations in the past 24 hours. The market witnessed the largest futures liquidation this year, as BTC witnessed liquidations of $498.88 million.
The data suggests most of the liquidated positions were longs, meaning traders were betting on Bitcoin’s price to rise. In the past 24 hours, the total liquidations come in at $1.04 billion, with $308.89 million and $27.56 million also coming 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 further drive the price down.
Bankrupt Chinese Property Giant
China Evergrande, China’s second-largest property developer, recently filed for US bankruptcy. This seems to have had some sort of domino effect on the price of Bitcoin, as the bankruptcy news came at the cusp of the recent decline.
Do you think this is in fear of evergrande and a domino effect or what could we be missing?
— besadam.lens (@besada_m) August 17, 2023
Does This Imply A New Wave Of Extended Bearish Sentiment For Bitcoin?
When Bitcoin crashes, it often brings the rest of the crypto market down with it. As such, the recent Bitcoin wipeout has led to a decrease in the price of other cryptocurrencies as well. Data from Coinmarketcap shows that Bitcoin is currently down by 7.06% in the past 24 hours. Major altcoin ETH, BNB, and XRP are also down by 5.77%, 5.19%, and 13.20%, respectively.
Bitcoin has had a volatile few months and has been struggling to cross over $30,000 this year. Notwithstanding, its price could quickly rebound again, particularly if the SEC grants approval to the most recent applications for Spot Bitcoin ETFs.
Featured image from iStock, chart from TradingView.com