Market Analysts Weigh In On Factors Behind the Sudden Price Drop
The cryptocurrency community was baffled after Bitcoin’s price experienced a sudden 8% dip in just 10 minutes on August 18th, around 9:35 pm UTC. Along with Bitcoin, the broader cryptocurrency market was also affected. Several analysts offered their theories for the unexpected market movement.
SpaceX Reportedly Selling Bitcoin, Market Reels
According to eToro market analyst Josh Gilbert, one potential cause of the drop might be SpaceX’s rumored sale of its Bitcoin holdings valued at $373 million. This theory is based on an August 17th article from the Wall Street Journal. Gilbert stated, “Whenever you have a big name in the industry selling Bitcoin, especially someone as influential as Elon Musk, it will put the price under pressure.” The price drop occurred about 2.5 hours after the article was published.
Furthermore, Gilbert pointed out that another contributing factor could be the shift in sentiment due to the broader markets’ expectations of future interest rate hikes by the U.S. Federal Reserve. “Bitcoin has struggled for a leg higher in the last month, trading in a tight range of between $29k and $30k with little ‘good news’ to push the asset higher, which has only exacerbated this sell-off,” he added.
Rising Bond Yields, Chinese Property Crisis, and Whale Movements
Another perspective comes from Tina Teng, a market analyst from CMC Markets, who attributes the decline to the recent increase in government bond yields. Teng explained that rising bond yields typically indicate a reduction in liquidity for the broader market. “This could be the primary reason cryptocurrencies sank,” she said.
Moreover, while the Evergrande crisis might indirectly affect Bitcoin’s price, Teng does not see it as one of the main reasons for the decline. “This has more of an impact on sentiment toward the Chinese economy and investors,” she explained.
However, the sudden market dip could also have been triggered by a single prominent actor making a big sell, as per pseudonymous derivatives trader @TheFlowHorse. “It was not just a natural cascade. Someone big bailed for a purpose and set it in motion. Spot volume barely compared to perps,” he told Cointelegraph. According to data from the crypto analytics platform Coinglass, more than $427 million in Bitcoin long positions were liquidated in the last 4 hours, amounting to over $822 million in the previous 24 hours.
Describing many explanations for the decline as “pure speculation,” Horse suggested that a large fund might have sold their Bitcoin position to “trigger a cascade to buy ETH,” especially since the reports of the SEC hinting at approving an Ethereum Futures ETF came moments after the dump.
Bitcoin has partially recovered from the crash, gaining 1.2% in the last two hours, and is trading at $26,619. This slight rebound appears buoyed by news that the SEC may approve an Ethereum Futures ETF product as early as October. Regardless of the causes behind this sudden market dip, it demonstrates the volatility of the cryptocurrency market and the multitude of factors that can influence its movement.