Not sure what triggered the sell-off today? Here are some theories that emerged to explain the volatility!
Bitcoin's price plunged suddenly on August 18th, falling over 8% within just 10 minutes. This massive flash crash also dragged down the prices of other major cryptocurrencies, rocking the wider crypto market. While the precise trigger for this sharp sell-off remains uncertain, several theories have emerged to explain the volatility.
SpaceX Sells Bitcoin Holdings
One speculated cause floated is a Wall Street Journal report that hinted that Elon Musk's SpaceX had sold off some or all of its Bitcoin holdings worth $373 million. Musk is an influential figure in the crypto space, so a major BTC sale from his flagship company could put significant pressure on prices. Musk's past tweets about crypto have moved markets, so this reported liquidation coming from his business rather than his personal Twitter could still spook investors.
However, X user @ashcryptoreal called it a FUD.
Fears of Federal Reserve Rate Hikes
In addition to the SpaceX sell-off thesis, some pointed to growing fears over impending Federal Reserve interest rate hikes which have dampened market sentiment. With expectations rising that rates will stay higher for longer to combat inflation, the appetite for risky assets like Bitcoin wanes. Bitcoin is seen as especially vulnerable if rates remain elevated, making safer havens more appealing.
Evergrande Bankruptcy
While Bitcoin had drifted lower earlier in the day, the sharper declines coincided with news that Chinese real estate giant Evergrande had filed for bankruptcy protection in the US. This fueled speculation that Evergrande's unfolding debt crisis could spill into broader economic turmoil in China.
With over $300 billion in liabilities, Evergrande's collapse triggered the worst property market crisis in China. The bankruptcy filing stoked contagion concerns, potentially catalyzing a flight from risky assets. Bitcoin and cryptocurrencies retreated as some investors shed assets perceived as speculative.
While not definitively the cause, Evergrande’s crisis may have contributed to the swirling headwinds facing Bitcoin amid an already risk-off environment.
Crypto Fear & Greed Index Hits 37
Whatever the exact catalyst, Bitcoin fell as low as $25,409 after trading around $29,000 for weeks.
Following the crash, the crypto fear & greed index on CoinMarketCap sank to 37, indicating high fear and bearish sentiment returning to the market.
The sell-off triggered a wave of liquidations, with approximately $1.04B worth of total liquidations in the past 24 hours, according to Coinglass. Bitcoin and Ethereum traders saw the bulk of the liquidations, totaling around $499.26M and $309.33M respectively. The market has recovered slightly with Bitcoin trading at $26,500, at the time of writing.
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