Bitcoin’s sudden drop last Thursday sparked theories as to what caused this unexpected turmoil in the market. Here are 3 theories that may have caused this fall.
Theory 1: Transfer of Bitcoin (BTC) by SpaceX
The first theory puts forward the possibility that SpaceX has sold some of its Bitcoin (BTC) holdings. Elon Musk’s aerospace company would thus have contributed to the recent price drop given the weight of its portfolio in the crypto market.
According to the Wall Street Journal, SpaceX recorded $373 million worth of Bitcoin on its balance sheet in 2021 and 2022. Crypto analyst Joe Burnett estimates that the price decline was triggered by the news about the sale of Bitcoin (BTC) by SpaceX.
However, other people in the crypto community believe that it was Evergrande’s fall that caused this fall.
Theory 2: Fall of Evergrande, a real estate giant
In addition to the sale of Bitcoin (BTC) by SpaceX, other significant events in the financial world have contributed to the unease in the market. Real estate giant China Evergrande recently filed for Chapter 15 bankruptcy protection.
The move follows the postponement of meetings with the company’s debt holders. This allows more time to assess a restructuring plan.
Theory 3: Federal Reserve Uncertainties
The third theory mentions the publication of the minutes of the last FED meeting. This has indeed created additional uncertainty. Minutes suggest future interest rate hikes may be needed. This could negatively impact risk sentiment and lead to a drop in the price of Bitcoin (BTC).
The impacts of the fall of Bitcoin (BTC)
The fall of BTC has resulted in significant losses for traders who have taken long positions. According to data from CoinGlass, nearly $823 million in long positions have been liquidated in the crypto market. In this context, bitcoin (BTC) traders faced total liquidation exceeding $500 million on both sides.
This turbulence in the crypto markets is also likely to instill fear and uncertainty among investors. In fact, the index Fear & Greed Index currently stands at 37, suggesting that fear is starting to take over. Should this trend continue, it could lead to further declines in the current price of Bitcoin (BTC), which is currently trading around $26,900.
However, some analysts remain bullish on the possibility of a rebound, especially if Bitcoin ETFs are approved.
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