Why did Bitcoin drop? Analysts point to 5 potential reasons

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Within a 10-minute period, the price of bitcoin dropped by about 8%, leaving cryptocurrency investors perplexed.


According to reports, SpaceX is selling its Bitcoin (BTC).lower tickers by $25,956 Among the explanations put out for Bitcoin's unexpected price decline include holdings, the bankruptcy of a Chinese real estate mogul, and concerns about interest rate increases.

Around 9:35 p.m. UTC on August 18, the price of Bitcoin abruptly dropped by almost 8% in a matter of 10 minutes, wiping out the larger cryptocurrency market and leaving many in the community perplexed.


While there doesn't seem to be agreement on the cause of the market's abrupt decline, a number of cryptocurrency market analysts have shared their initial views with Biloo_Tips. 


SpaceX offloads Bitcoin, interest rate fears

According to EToro market analyst Josh Gilbert, the decline was caused by a claim that SpaceX may have sold all or part of its $373 million in Bitcoin assets. This news was based on a Wall Street Journal article dated August 17th. 

("Whenever a well-known figure in the field is selling Bitcoin, particularly someone with Elon Musk's clout, it will put pressure on the price.")


This would place the unexpected price reduction 2.5 hours after the online publication of the article.



Another possibility, according to Gilbert, is that the abrupt change in sentiment is the result of larger market expectations for future interest rate increases from the U.S. Federal Reserve.


Gilbert said, "It was a formula for a decline if we also take into account some of the problems we've seen throughout global markets — notably risk assets — over the previous few weeks with the anticipation that rates will probably stay higher for longer.


He continued, "Bitcoin has struggled to gain a leg higher in the past month, trading in a narrow range of between $29k and $30k with little 'positive news' to push the asset higher, which has only exaggerated this sell-off.


Government bond yields

A market analyst from CMC Markets named Tina Teng offered a different perspective, blaming the sell-off on the recent increase in government bond yields.


According to Teng, rising bond rates often signal a decrease in market liquidity.


This might be the main cause of the decline in cryptocurrency prices, she suggested.


Teng added that while the Evergrande situation might indirectly affect the price of bitcoin, she didn't think it was one of the main reasons for the decrease. "This has more of an effect on investor and economic sentiment toward China," she said.



Chinese Yuan still a risk to Bitcoin

However, while Markus Thielen, Head of Research at Matrixport, asserted that the prospect of a Chinese Yuan depreciation may have played a large influence in the sell-off, Teng dismissed the Evergrande problem as a major factor in the price fluctuation of Bitcoin. 


(The Chinese Yuan, which is currently trading at its lowest level since 2007, is the largest macrorisk.)


"When China devalued the Yuan for the final time in August 2015, Bitcoin values fell by -23% in the two weeks that followed the devaluation. Before a more significant rally got going, Bitcoin ended the year up +59% from its depreciation level, according to Thielen.


Whale's selling big

TheFlowHorse, a pseudonymous options trader, told Cointelegraph that the abrupt move down may have been caused by a single large actor making a massive sell, which then put additional pressure on derivatives, despite the fact that there were numerous other news events that could be to blame.


"It wasn't just a cascade in nature. It began when a powerful person left for a specific reason. Spot volume was hardly comparable to criminals.


In the four hours prior to publication, more than $427 million in long bets in Bitcoin were liquidated, according to data from the cryptocurrency monitoring portal Coinglass. There had been more than $822 million in liquidations for traders with open long positions during the previous 24 hours, a wager that the price of crypto assets would rise.

Long positions in Bitcoin have been liquidated in the last day for more than $427 million.

Horse said that given the news of the SEC signaling its approval of an Ethereum Futures ETF arrived moments after the dump — a huge fund may have offloaded their Bitcoin stake to "trigger a cascade to buy ETH" because many of the causes for the decrease were "pure speculation."


Disclaimer:

This widget's information is not meant to be used as advise in terms of law, taxes, investments, finance, or any other field. 

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