At 21:45 GMT On Thursday, 17 August 2023, Bitcoin saw a drop of .2% to US$26,634. This constitutes a loss of US$2,067 from its previous close.
Bitcoin, the world’s biggest and best-known cryptocurrency, is down 16.3% from the year’s high of US$31,818 on 13 July.
Ether, the coin linked to the Ethereum blockchain network, also saw a decline, dropping 11.29% to US$1,547.4 on Thursday, losing US$203.80 from its previous close.
It is difficult to pinpoint exactly why there was such a drastic drop in the markets in such a short period of time. However, crypto market analysts have come up with several potential theories as to why.
SpaceX offloads Bitcoin
One EToro market analyst theorises that the drop was due to a report that SpaceX may have offloaded some or all of its $373 million in Bitcoin holdings, which came from a 17 August article from The Wall Street Journal. Another theory could be the rapid shift in sentiment, due to larger market expectations that interest rates may rise from the US Federal Reserve.
Government bond yields
Another analyst from CM markets believes that the recent rise in government bond yields is the root cause behind the sell-off. Increasing bond yields typically shows a reduction in liquidity for the broader market, meaning markets have less opportunities to buy and sell, and assets become difficult to trade.
Chinese yuan is a risk to Bitcoin
Some believe that the recent Evergrande crisis has had an effect on Bitcoin prices. Matrixport Head of Research Markus Thielen claimed the risk of a Chinese Yuan devaluation may have played a significant role in the sell-off.
He said that when China devalued the Yuan for the last time in 2015, Bitcoin prices declined by -23% during the two weeks following the devaluation.
Whales selling off
Analysts from TheFlowHorse seem to believe that the sudden drop in value could be the result of a single large actor (whale) making a big sell, which then resulted in further pressure on derivatives. Crypto analytics platform Coinglass revealed data which showed that more than US$427 million worth of Bitcoin long positions have been liquidated in the last 24 hours.
