EMERGENCY CRYPTO CRASHING, What to do?

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EMERGENCY CRYPTO CRASHING, What to do?

The crypto market faced a massive $1 BILLION Bitcoin Bloodbath in the Last 24 hours and Elon Musk isn’t the only cause. Everyone is in a state of panic right now. Why is the market crashing?

Which crypto should I do BUY, SELL or HOLD? Before I came to any conclusions I did thorough research to understand all the factors contributing to this crash. I found out 5 major reasons that contributed to this crash. Throughout this article, I will explain to you why a particular factor could have contributed to the crash and whether it could have pulled the market further down.

Catalyst #1: SpaceX-bitcoin (SpaceX’s holding written down by $373M Worth of BTC) news reignited the sell-off News.

SpaceX Bitcoin Sale: SpaceX reportedly sold a significant portion or all of its $373 million Bitcoin holdings. This news, reported on August 17 by The Wall Street Journal, led to a sudden drop in Bitcoin’s price.

Some opinions: The co-founder of Dogecoin weighed in on the situation, finding it amusing how the past sale of Bitcoin by SpaceX is causing a crash in the crypto sector.

My opinion: this could be just a FUD for no reason at all. Businesses often write down assets for tax purposes. On-chain movements or any report is not there to confirm the selling of BTC. We shouldn’t panic about this one honestly.

Influence of Elon Musk: The crypto market analyst, Josh Gilbert from eToro, attributed the price drop to the influence of prominent figures like Elon Musk. Musk’s involvement in the crypto space has been known to impact prices, and his reported Bitcoin sale contributed to downward pressure on the price. my take: Musk could’ve caused the panic, but the technical reason is another. BTC saw the largest liquidation since FTX’s collapse, with long liquidations as big as a staggering $400M.

Catalyst #2: Market Sentiment.

Sentiment Shift: Another potential factor contributing to the price drop was a rapid shift in market sentiment. Concerns arose from expectations of future interest rate hikes by the U.S. Federal Reserve. This shift in sentiment, combined with uncertainties in global markets, contributed to a broader pullback in risk assets.

My opinion: I think BTC prices acted agnostic to FED rate hikes for the past few iterations. There was rather a neutral sentiment for BTC as BTC halving is getting closer and a good chance of SEC approving the BTC spot ETF but yes there are.

Technical corrections: Bitcoin had been struggling to gain upward momentum in the past month, trading within a relatively narrow range between $29,000 and $30,000. The absence of positive news to drive the price higher added to the selling pressure on the asset, exacerbating the overall sell-off.

Catalyst #3: More liquidations resulted in a monumental selling cascade.

My opinion: BTC dumping to $26k seems nothing more than a massive liquidation. This is concerning as we see the perpetual funding rate going negative, this is indicative of further price drops. Almost $1B worth of open trades are nuked. We should be careful as the market is extremely volatile right now.

More Reasons (Whale’s selling big)

Whale-Initiated Selling Pressure: A significant factor behind the abrupt Bitcoin price drop was a large whale, executing a substantial sell order. This triggered a chain reaction, leading to further selling and putting pressure on derivatives markets.

Derivatives Liquidations: TheFlowHorse, a pseudonymous derivatives trader, suggested that the initial large sell order had a cascading effect on the market. This resulted in the liquidation of over $427 million worth of Bitcoin long positions within four hours. Over the past 24 hours, more than $822 million in liquidations occurred for traders who had open long positions, which bet on crypto asset prices moving upward.

Ethereum ETF Speculation:

The trader indicated that various explanations for the decline were speculative in nature. Notably, the trader proposed that a major fund might have strategically sold off their Bitcoin holdings to prompt a domino effect that would lead to buying Ethereum. This assumption was fueled by reports of the SEC potentially approving an Ethereum Futures ETF around the same time as the market drop.

Whale Behavior and Long-Term Holders: On-chain data analysis revealed that significant Bitcoin holders increased their spending activity both before and during the market sell-off. However, this behavior, while noteworthy, was not substantial enough to reverse the downward trend. Despite this, historical patterns indicated that increased whale spending had preceded price surges in the past, suggesting that long-term BTC holders might maintain their positions in anticipation of potential market recovery.

Catalyst #4: Another catalyst for the overall market dump: Chinese Property giant Evergrande’s bankruptcy

China Evergrande, a major property giant, recently filed for bankruptcy protection under Chapter 15 of US bankruptcy law.

Evergrande Crisis and Chinese Yuan Devaluation

Tina Teng’s Perspective: Evergrande Crisis Disregarded: Tina Teng, a market analyst from CMC Markets, did not consider the Evergrande crisis as a primary cause for the recent swing in Bitcoin’s price. So, her view diverged from the idea that the crisis had a significant impact on the cryptocurrency market.

Markus Thielen’s Insight: Chinese Yuan Devaluation Impact: Markus Thielen, the Head of Research at Matrixport, proposed an alternative explanation for the Bitcoin price sell-off. He suggested that the risk of a devaluation of the Chinese Yuan might have played a pivotal role in driving the market downturn. So, the Chinese Yuan’s current weak trading level, comparable to 2007, was highlighted as a significant macro risk factor.

Historical Comparison and Potential Impact: Thielen drew parallels to a past event in August 2015 when China devalued the Yuan. During the following two weeks, Bitcoin prices saw a decline of -23%. However, after this initial dip, Bitcoin eventually rebounded, finishing the year with a positive growth of +59% from the level of the devaluation. So, this historical comparison suggested that a potential Chinese Yuan devaluation might have contributed to the recent sell-off in Bitcoin.

Overall, while Tina Teng dismissed the Evergrande crisis as a primary factor, Markus Thielen’s perspective emphasized the impact of a potential Chinese Yuan devaluation as a significant macroeconomic risk affecting Bitcoin’s recent price movement

Catalyst #5

Finally, regulatory Fears: – SEC delays all ETF approvals to early 2024. Also, PayPal to halt BTC purchases in the UK until 2024.

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Disclaimer

The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment, and informational purposes only. Any information or strategies are thoughts and opinions relevant to the accepted levels of risk tolerance of the writer/reviewers and their risk tolerance may be different than yours. We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments so please do your due diligence. Copyright Altcoin Buzz Pte Ltd.

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