Last Thursday, the cryptocurrency market experienced a broad sell-off. This occurred amid macroeconomic and market concerns, as well as rumors of a SpaceX sale and Evergrande bankruptcy. Bitcoin lost $2500, and more than $1 billion was liquidated in the digital currency market in less than 24 hours.
On Friday, market participants tried to piece together what had triggered the sudden sell-off, and as Bitcoin dipped below $26,000, everyone was trying to figure out how much further the cryptocurrency could fall.
SpaceX and Elon Musk
One of the main causes of panic was an article in the Wall Street Journal about Elon Musk's SpaceX, published on the day of the sell-off. At the end of the article, there was a brief paragraph about Bitcoin in the section dedicated to the company's finances. The paragraph stated that last year, SpaceX wrote off the value of its Bitcoin holdings totaling $373 million and sold the cryptocurrency in 2021. Tesla also took a similar approach to its Bitcoin assets. Musk has often written about cryptocurrencies over the years. Market participants were puzzled by what this might mean. Did it imply that Musk had completely abandoned Bitcoin?
Evergrande and China's Concerns
In the second half of the day, another significant event occurred that rocked both the cryptocurrency and traditional markets. It was the announcement that Chinese commercial real estate giant Evergrande was filing for bankruptcy in the United States. This statement was particularly threatening for cryptocurrency, as many believed that the largest stablecoin by market capitalization, USDT Tether, as well as the entire digital asset ecosystem, was backed by Chinese commercial paper. Even if this turned out to be untrue, the filing still led to a mass rejection of risky assets, affecting Bitcoin and cryptocurrency overall.
Market and Macroeconomic Reasons
The current macroeconomic backdrop seems rather uncertain, as U.S. interest rates remain high and signs of slowing economic growth are increasing. China appears to be in a deep recession. Market participants are likely to be more cautious now. Bitcoin may fall further. Then, large institutional buyers will likely start snapping up relatively cheap Bitcoin. Additionally, a spot ETF for BTC will be launched in the U.S. In April 2024, there will be a halving event, and Bitcoin will likely start to rise again.
