On the night of August 17 to 18, a pronounced crash reverberated across the altcoin landscape, causing both Bitcoin (BTC) and Ethereum (ETH) to experience a sharp decline in value. Bitcoin lost 7.53% of its value within a mere 24 hours, while Ethereum’s value dropped by 6.73%. The sudden upheaval in the market can be traced back to multiple factors that converged to create a perfect storm of volatility.
Reason 1: SpaceX’s $373 Million Bitcoin Sell-off
The crypto community was jolted by news that SpaceX, the pioneering aerospace company led by Elon Musk, had sold off a staggering $373 million worth of Bitcoin. Previously holding this digital asset in its balance sheet, SpaceX’s decision sent shockwaves through the market. Notably, the price plunge commenced around two hours and twenty minutes after the report’s release, with Bitcoin’s price plummeting from approximately $28,553 to a strikingly lower $25,166 on Binance. The repercussions were even more dramatic on exchanges with lower liquidity, pushing the price down to $24,400 and triggering an avalanche of liquidations. Elon Musk’s history of involvement with Bitcoin, including purchases at $28,000–$30,000 and Tesla’s past ownership, adds an intriguing layer to this event.
Reason 2: US Treasury Bond Yield Surge
The specter of potential interest rate hikes loomed large as the US Treasury bond yields surged to their highest levels since October. The Federal Reserve’s publication of the “Minutes of the Federal Open Market Committee” highlighted the likelihood of rate hikes in response to persistent inflation. Following the report, Bitcoin’s value dipped from around $29,200 to $28,700 on August 16, signaling the market’s sensitivity to macroeconomic indicators.
Reason 3: Evergrande Group’s Chapter 15 Bankruptcy Protection
The financial turmoil was further fueled by news that the Chinese real estate giant Evergrande Group filed for Chapter 15 bankruptcy protection in New York. This development carried significant ramifications, not only for China’s real estate sector but also for its broader economy. China’s economic slowdown, triggered in part by Evergrande’s default, rippled through the market and contributed to investor uncertainty, potentially prompting asset liquidation.
Reason 4: The Whale’s Influence and Increased Liquidations
A pseudonymous derivatives trader under the handle @TheFlowHorse revealed that a substantial and deliberate crypto sell-off by a single influential seller played a role in the downward spiral. This action set off a cascade effect, creating heightened pressure on derivatives and amplifying the market’s volatility. The significance of this market mover’s action highlights the intricate interconnectedness of the cryptocurrency ecosystem.
Reason 5: DeFi Liquidation Surge
In the midst of this tumultuous period, the decentralized finance (DeFi) sector experienced record-breaking liquidations, surpassing $75 million within a single day. The liquidation of over $54 million worth of Ethereum underscored the vulnerability of leveraged positions, raising concerns about further liquidations should Ethereum’s price decline to around $1,480.
As the cryptocurrency landscape grapples with these complex and interwoven factors, Bitcoin’s value stands at $26,542, with Ethereum trading at $1,680. The market’s struggle for equilibrium persists, while the aftermath of these events underscores the inherent volatility and interconnectedness of the crypto realm. Despite the uncertainty, analysts anticipate that, over time, the market will regain its balance and lessen the current heightened state of unpredictability.
