Elon Musk's SpaceX Not Responsible for Recent Multi-Billion-Dollar Bitcoin Price Drop

Claude Pascal
25 Sep 2023
Bitcoin prices experienced an abrupt decline late on Thursday, leading to significant losses across futures and spot markets.

Reetika, a Dubai-based bitcoin and crypto trader, was taken by surprise when she checked the prices upon waking up. The sudden and deep losses shocked traders and crypto enthusiasts worldwide, as the market had been relatively uneventful for weeks.

The cryptocurrency market experienced a 6.7% drop in overall capitalization, marking one of the most substantial declines in recent months. Bitcoin's value plummeted by 9% over the past 24 hours, falling from $28,500 to $25,000 on Binance. This downturn triggered a market-wide slump, with major tokens like litecoin (LTC) falling by 14%. As a result, over $1 billion in crypto futures was liquidated, marking a 14-month high.

Some suggested that SpaceX's rumored bitcoin sales and China Evergrande's bankruptcy might have caused the fall. However, neither of these events is the likely cause.

A Wall Street Journal report revealed that SpaceX had devalued and sold its bitcoin holdings in 2021 and 2022. Still, this information was released before the price drop, and there is no evidence to suggest that the company sold more bitcoin on Thursday.

Professional traders argue that market structure and liquidations likely triggered the sudden drop instead of a single fundamental catalyst. The market had been relatively stagnant and illiquid, creating conditions conducive to sudden price movements.

Market participants had seen an increase in futures positions, particularly shorts, and the break below $28,500 led to a significant number of long liquidations. Long traders were forced to sell their positions to avoid liquidation, intensifying selling pressure and creating a cycle of falling prices and long position closures.

Data indicates that most long liquidations occurred on the crypto exchange OKX, accounting for nearly 40% of the entire market.

Some fundamental factors, such as rising U.S. interest rates, also contributed to the market's negative sentiment. The 10-year yield reached 15-year highs, impacting risk assets.

Analysts at CryptoQuant, an on-chain data platform, expect sentiment to remain bearish in the coming days, citing increasing funding rates from short traders.

Traders are also awaiting a Grayscale court ruling on the issuance of a bitcoin exchange-traded fund (ETF), which is expected to have a significant impact on the market. The ruling is anticipated to be announced on Friday and could either trigger a market surge if it favors Grayscale or further market turbulence if it goes against the company.

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