The price of Bitcoin (BTC), the world’s largest digital asset, plummeted as much as 9% today, briefly trading at under $25,000.
The largest cryptocurrency by market cap is trading for $26,494 as of this writing, according to CoinGecko. This unexpected and dramatic Bitcoin price decline has re-focused attention on Bitcoin, prompting concerns about its intrinsic volatility, investor mood, and the larger ramifications for the cryptocurrency market.
Unraveling the Factors Behind Bitcoin Price Sharp Slip
Market analysts and crypto experts have been quick to attribute such sharp declines to a multitude of factors, ranging from regulatory developments and macroeconomic shifts to even market-driven sentiment.
The recent sharp dip in Bitcoin’s price has been attributed by some analysts to the regulatory uncertainty surrounding the US Securities and Exchange Commission’s (SEC) stance on Bitcoin Exchange Traded Funds (ETFs) approvals.
Sell-side research firm Wolfe Research emphasized in a report that the cryptocurrency’s price could continue to dip before witnessing an upward trajectory if the SEC approves a Bitcoin ETF. This sentiment was echoed by CNBC’s report, which outlined the expectations that a positive regulatory decision could spur another round of price growth.
Another key player in the recent market turbulence has been the surge in global interest rates, notably in the United States. According to Bloomberg, the 30-year Treasury bond reached 4.42%, the highest level since 2011.
Meanwhile, the 10-year yield, hovering at 4.32%, came within a narrow margin, reaching a 15-year high. These upward movements in bond yields reflect a changing economic landscape, potentially heralding shifts in monetary policy and investor expectations.
The repercussions of these escalating interest rates are not limited to the bond market alone. Risk assets, a broad category encompassing equities, and cryptocurrencies like Bitcoin, have felt the impact as well. A notable indicator is the Nasdaq, which has experienced a 6% decline over the course of August.
Elon Musk’s Influence and SpaceX’s Bitcoin Sale
The downside volatility of Bitcoin also comes shortly after news broke that SpaceX, the innovative space travel company led by Elon Musk, had written down the value of its Bitcoin holdings by a total of $373 million and had also sold a portion of its Bitcoin holdings.
Ryan Rasmussen, a researcher at Bitwise Asset Management, pointed out that the sudden and drastic nature of the Bitcoin selloff could be linked to Musk’s involvement. He noted that this type of decline appeared to be “short-sighted and largely retail-driven”, suggesting that individual retail investors might have been particularly responsive to any signals emanating from influential figures like Musk.
Meanwhile, the interconnected nature of the crypto market was evident once again as Bitcoin price recent sell-off triggered a domino effect, causing the values of other major cryptocurrencies to plummet.
Ethereum (ETH), the second-largest cryptocurrency, bore the impact of Bitcoin’s fall, shedding 4.5% of its value within a 24-hour period. Similarly, Dogecoin (DOGE) faced a decline of over 5% during the same period, and is trading at $0.06 at the time of writing.