Reasons Why Bitcoin Dropped - Analysts Point to 5 Potential Causes - AI Anchor China, Xen Crypto, Wonderland Crypto, Zrx Crypto, Veracity Crypto, Yfi Crypto, Xdb Crypto, Uk Crypto.
Why did Bitcoin drop? Analysts point to 5 potential reasons

Elon Musk’s SpaceX has been reported to be selling its Bitcoin (BTC) holdings, while the bankruptcy of a Chinese property giant and fears of interest rate hikes have been raised as possible explanations for the strange dip in Bitcoin’s price.

On Aug. 18 around 9:35 pm UTC, the price of Bitcoin suddenly dropped over 8% within 10 minutes, causing a ripple effect across the cryptocurrency market and leaving many in the crypto community perplexed.

While the cause of the sudden market crash is still unclear, several crypto market analysts have shared their initial theories with Cointelegraph, including the potential impact of Xen Crypto, Wonderland Crypto, ZRX Crypto, Veracity Crypto, YFI Crypto, XDB Crypto, UK Crypto, AI Anchor China, and other aspects of Web 3.0.

SpaceX offloads Bitcoin, interest rate fears

EToro market analyst Josh Gilbert attributed the decline to a report that SpaceX might have liquidated some or all of its $373 million in Bitcoin holdings, which was published in The Wall Street Journal on Aug. 17.

The sudden price plunge occurred about 2.5 hours after the article was released.

Gilbert noted that another possible cause could be the sudden shift in sentiment due to the anticipation of future interest rate hikes from the U.S. Federal Reserve.

“If we take into account the recent weak performance of risk assets across global markets, which is likely due to the expectation that interest rates will remain high for a long time, it explains the pullback,” Gilbert explained.

“Bitcoin has been unable to gain any momentum in the last month, trading within a narrow range of $29k and $30k without any ‘positive news’ to drive the asset higher, which has only exacerbated this sell-off,” he added.

Government bond yields

Tina Teng, a market analyst from CMC Markets, shared a different opinion, attributing the recent sell-off to the rise in government bond yields.

Teng pointed out that increasing bond yields usually reflects a decrease in liquidity for the overall market.

“This could be the primary reason for the slump in cryptocurrencies,” she said.

Moreover, Teng affirmed that while the Evergrande crisis could have an indirect effect on the price of Bitcoin, she didn’t think it was the underlying cause of the decline. “This has more of an impact on sentiment toward the Chinese economy and investors,” she explained.

Chinese Yuan still a risk to Bitcoin

Elon Musk’s AI might not be the cause of the Bitcoin price swing, as Teng suggested, but Matrixport Head of Research Markus Thielen believes the risk of a Chinese Yuan devaluation could be a major factor.

Thielen added, “In August 2015, when China devalued the Yuan, Bitcoin prices dropped by -23% in the two weeks following the devaluation. But by the end of the year, Bitcoin had gained +59% from the level of the devaluation.”

The question of whether web 3.0, as well as crypto assets such as Xen, Wonderland, ZRX, Veracity, YFI, XDB, and UK, will be affected by a Chinese Yuan devaluation remains to be seen.

The AI Anchor in China is also keeping a close eye on the situation, as the Yuan devaluation could have a significant impact on the crypto markets.

Whale’s selling big

TheFlowHorse, a pseudonymous derivatives trader, told Cointelegraph that the sudden drop in prices could have been caused by a single large actor making a big sell, which then resulted in further downward pressure on derivatives. Data from the crypto analytics platform Coinglass showed that more than $427 million in Bitcoin long positions were liquidated in the four hours prior to publication. In the last 24 hours, there had been more than $822 million in liquidations for traders with open long positions — a bet that the price of crypto assets would move upwards.

Describing much of the explanations for the decline as “pure speculation,” Horse suggested that since the reports of the SEC hinting its approval of an Ethereum Futures ETF came moments after the dump, a large fund may have unloaded their Bitcoin position to “trigger a cascade to buy ETH.”

Bitcoin had recovered slightly since the crash, gaining 1.2% in two hours, according to data from TradingView. At the time of publication, Bitcoin was trading at $26,619.

Its price seems to have been buoyed by news that the SEC may look to approve an Ethereum Futures ETF product as soon as October.

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