- Bitcoin witnessed a sharp 9% decrease, causing over $1 billion in crypto futures liquidations, in one of the biggest drops recently.
- Despite speculations linking SpaceX to the plunge, market mechanics and other potential catalysts are more likely the culprits.
Crypto Traders Wake Up to a Red Morning
Reetika, a Dubai-based crypto enthusiast, echoed the thoughts of many when she checked her portfolio after waking up: “WHO SOLD?” For several weeks, the cryptocurrency world had been relatively placid, but this tranquility was shattered when Bitcoin’s value plummeted from $28,500 to $25,000 on Binance within 24 hours. This dramatic descent led to widespread effects, pushing Litecoin (LTC) down by 14% and causing a staggering $1 billion in crypto futures liquidations.
Just woke up.
WHO SOLD pic.twitter.com/iusl2dAC20
— Reetika (@ReetikaTrades) August 18, 2023
Decoding the SpaceX Myth
Rumors swirled, with some attributing this seismic market shift to SpaceX’s alleged Bitcoin sales. However, these claims lack concrete evidence. Instead, according to a Wall Street Journal report, SpaceX merely adjusted the value of its Bitcoin holdings in a procedure known as an “asset write-down.” In simpler terms, when the market value of an asset drops below its recorded cost, companies will reduce the listed value of that asset for tax benefits. As of the moment, no verified data exists regarding the exact amount of Bitcoin owned by Elon Musk’s SpaceX, or any evidence to suggest a massive sell-off from their end.
The True Culprits: Market Dynamics and Other Catalysts
Expert traders assert that the price dip was more influenced by market structure and sudden liquidations than by a single event. With the market being somewhat stagnant and lacking liquidity, conditions were prime for abrupt price changes.
3/ Whales' Distribution
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From the On-chain perspective, we can see an increase in whale spending activity before and during the sell-off. pic.twitter.com/AVRZs30LsP
— CryptoQuant.com (@cryptoquant_com) August 18, 2023
Lewis Harland, a trader at Decentral Park Capital, informed CoinDesk about the intricacies of market mechanics. He mentioned the critical role of “open interest,” which pertains to unsettled futures contracts. Essentially, when a large amount of these contracts accumulates in a stagnant market, a significant sell-off by a major entity can lead to swift price reductions. This domino effect can cause a cascade of selling as traders scramble to avoid losses, further depressing the price.
Furthermore, data indicates a majority of these liquidations occurred on the OKX crypto exchange, which accounted for nearly 40% of the market.
Additionally, some analysts point to external financial factors, such as the rising U.S. interest rates, which have surged to multi-year highs. Such spikes in interest rates can spell trouble for risk assets like cryptocurrencies.
Lastly, the crypto community keenly anticipates a crucial Grayscale court ruling concerning a Bitcoin exchange-traded fund (ETF). This decision, expected soon, could either bolster the market or push it into deeper waters, depending on the outcome. The overarching sentiment seems to be one of watchful waiting, with all eyes on the next moves of the ever-volatile crypto market.
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