• Elon Musk’s SpaceX has reportedly sold all of its Bitcoin holdings on the balance sheet.
• Fed hinting at future rate hikes and the rise in government bond yields has also contributed to the Bitcoin selling pressure.

On Thursday, August 17, the world’s largest cryptocurrency Bitcoin (BTC) faced a major price correction crashing over 8% and taking a dip under $25,000. As of press time, BTC is trading 7.40% down at $26,534 with a market cap of $516 billion.

Along with Bitcoin, the broader cryptocurrency market has also undergone a major 7% crash leading to more than $800 million in liquidations in less than 24 hours. Multiple reasons have converged for the recent price crash in Bitcoin that comes following a major volatility squeeze that occurred for weeks together. Let’s take a look at each of these reasons one by one.

SpaceX Offloads $373 Million Worth of Bitcoins

On Thursday, Wall Street Journal reported that Elon Musk’s SpaceX offloaded #373 million worth of its Bitcoin holdings. With this, SpaceX has reportedly liquidated all of the company’s Bitcoin holdings on its balance sheet.

The news was enough to dampen the market sentiments leading to a major sell-off in the crypto space. EToro market analyst Josh Gilbert said:

Whenever you have a big name in the industry selling Bitcoin, especially someone as influential as Elon Musk, it will put the price under pressure.

Gilbert also added that there’s a strong shift in the market sentiment with Fed Chairman Jerome Powell recently hinting at future interest rate hikes amid the sticky inflation. Gilbert explained:

If we also consider some of the weaknesses we’ve seen across global markets — particularly risk assets — over the last few weeks with the expectation that rates will likely stay higher for longer, it was a recipe for a pullback. Bitcoin has struggled for a leg higher in the last month, trading in a tight range of between $29k and $30k with little ‘good news’ to push the asset higher, which has only exuberated this sell-off.

Government Bond Yield, Chinese Yuan Risk

Expressing an alternative viewpoint, Tina Teng, a market analyst at CMC Markets, attributed the downturn to the recent upsurge in government bond yields.

Teng clarified that rising bond yields often indicate decreased liquidity within the broader market. She highlighted that this decrease in liquidity might have played a central role in the decline of cryptocurrencies.

Furthermore, Teng pointed out that while the Evergrande crisis could have exerted an indirect influence on Bitcoin’s price, she was of the opinion that it wasn’t a primary factor behind the downturn. She elaborated, stating that the Evergrande situation had a more substantial impact on investor sentiment concerning the Chinese economy.

Matrixport Head of Research Markus Thielen believes that the devaluation in the Chinese Yuan could be another cause behind the sell-off. Thielen said:

“The biggest macro risk is a potential devaluation of the Chinese Yuan, which is trading at the weakest level since 2007. In August 2015, when China devalued the Yuan for the last time, Bitcoin prices declined by -23% during the two weeks following the devaluation. Before a more meaningful rally started, Bitcoin finished the year +59% from the level of the devaluation”.

Bitcoin Whales Are Selling Big

The aftermath is still unfolding following a substantial price decline in the crypto markets, marking one of the most significant drops of 2023. Notably, a significant number of $1M+ $BTC transactions are taking place, indicating significant whale activity during this market downturn. However, it’s noteworthy that the count of large wallets has not decreased.