On August 17, Bitcoin’s price dropped by about 8% over the course of 20 minutes, sending the traditional cryptocurrency below $26,000 for the first time since June 20. Along with Bitcoin, other prominent crypto assets, such as Ethereum, also experienced a sharp decline.
Data from CoinGlass shows that the carnage resulted in liquidations worth over $1 billion. That included the liquidation of roughly $472 million in Bitcoin and $302 million in ether. During the rush to the exits, long positions were most commonly impacted.
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However, everyone is wondering if Elon Musk’s SpaceX was involved in the surprise significant sell-off in the cryptocurrency markets.
Bitcoin Holdings at SpaceX Were Reduced by $373 Million
Initial reactions from the community on Crypto Twitter (X) have linked the sharp price decline to an unproven report that Elon Musk’s aerospace technology company SpaceX purportedly sold all of its $373 million worth of Bitcoin.
However, according to a Wall Street Journal story, SpaceX only took a loss on its BTC stockpile. When an asset’s fair market value falls below its book value, the asset’s book value is reduced in accounting terms. Since it reduces the value of any holdings for tax purposes, the strategy is particularly popular among enterprises.
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Others blamed the Thursday decline in Bitcoin on the Chinese real estate firm Evergrande Group declaring bankruptcy in New York under Chapter 11.
Real Reason Behind BTC Flash Crash
Although the false information on SpaceX’s Bitcoin sale may have contributed to the flash crash, other signs suggest that a retreat was already in the works.
CryptoQuant, an on-chain analytics tool, identified a number of reasons that could lead to a price decline. The first to notice a building of short positions in the Bitcoin Open Interest since mid-July were analysts at CryptoQuant.
Second, the company saw that there was a period of low demand in the US prior to the Bitcoin crash. Another possible indicator was the rise in whale spending activity prior to the sell-off. Last but not least, CryptoQuant pointed to the general gloomy mood among traders as a sign of the quick swing downward.
The announcement that the U.S. Securities and Exchange Commission (SEC) may shortly approve the first Ethereum Futures ETF product may have helped Bitcoin somewhat recover to $26,504.02 at the time of writing.
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