I just woke up. who sold?
This was the first thought that occurred to Reetika, a Dubai-based bitcoin (BTC) trader, during her usual routine of checking prices after waking up.
Reetika told CoinDesk in a message:
Bitcoin slumped on Thursday as traders sold off the tokens en masse based on several unrelated catalysts, causing crypto markets to lose 6.7% of total capitalization in what marked one of the biggest drops in recent months.
In the past 24 hours, bitcoin fell as much as 9% to $25,000 from $28,500 on Binance, triggering a market-wide drop that sent major tokens like litecoin (LTC) down 14%. This led to the liquidation of more than $1 billion in cryptocurrency futures contracts, the highest level in 14 months.
Some pointed out to space exploration company SpaceX’s supposed bitcoin sales — an unsubstantiated claim — while others have said that China Evergrande’s bankruptcy may have had something to do with the fall. However, none of these events may have an impact on prices.
SpaceX just wrote down the value of its bitcoin holdings, according to Wall Street Journal report. Among accountants, this is a decrease in the book value of an asset when its fair market value falls below its book value.
Asset write-offs are common among businesses – as they reduce the value of any property for tax purposes. As of the Asian morning hours on Friday, SpaceX had not confirmed or reported any sales of its bitcoin holdings. As such, it is still unknown how much bitcoin or cryptocurrency Elon Musk owns.
Long press and what really happened
Professional traders say market structure and liquidations were a possible cause of the sudden decline rather than a single underlying catalyst. The market was also relatively illiquid and flat – creating ripe conditions for sudden moves.
“Potential grayscale decision tomorrow. We have seen increased BTC OI in place, with a tendency to short sell,” Louis Harland, a trader at Decentral Park Capital, said in a message to CoinDesk. of purchase deals. This has been combined with a pre-date spot sale (with further delays likely to be expected).
Open interest refers to the number of volatile futures contracts for any financial asset. In a flat market, the rapid building of a large number of futures positions sometimes leads to a rapid drop in prices in the event of a large sell-off by an influential player.
This is because as prices fall, long traders have to sell their positions to avoid liquidation – increasing selling pressure, but at the same time, creating an endless cycle of falling prices and covering long positions.
Data appears Most of the long liquidations occurred on the OKX cryptocurrency exchange, which accounts for nearly 40% of the entire market.
With that said, some of the primary catalysts are higher interest rates in the US, as previously reported.
Interest rates in the United States are rising to their highest levels in several years. The 10-year yield rose to a 15-year high. These are generally downside assets,” Harland added. “If the sell-off in bonds continues, we may see continued negative price action in risky assets through the end of the week.”
Elsewhere, analysts at on-chain data platform CryptoQuant told CoinDesk that they expect sentiment to remain bearish in the coming days — pointing to increased funding rates from short traders, or those who bet on prices.
Funding rates are periodic payments that traders make based on the difference between prices in the forward and spot markets. Depending on their open positions, traders will pay or get funded. Payments ensure that there are always participants on both sides of the trade.
Higher rates can create volatility, as traders are incentivized to be on one side of the market – thus increasing futures and spot market movements.
Meanwhile, traders appear to be awaiting a Grayscale court ruling on issuing an exchange-traded fund (ETF), which is It is widely expected to be announced Friday.
A federal appeals court will publish its ruling in the ongoing Grayscale V. SEC case that will determine whether the US Securities and Exchange Commission (SEC) was unreasonable in its repeated rejections of the Grayscale Bitcoin ETF. The ruling, in Grayscale’s favor, is expected to trigger a market-wide rally, while the opposite could shake the markets further.
Omkar Godbolly contributed to this report.
Update (August 18, 08:22 UTC): to correct the spelling of Evergrande in the sixth paragraph.