Cryptocurrencies continued their downward trajectory, mirroring the slide in global risk assets as investors factored in expectations of extended higher interest rates. Worries intensified with reports that Elon Musk’s SpaceX had sold off its Bitcoin holdings.
At 9 a.m. London time on Friday, Bitcoin dropped by 4.4%, setting course for its most significant weekly decline in three months. The cryptocurrency had touched a low of $25,314, reversing from $28,947 the previous day. The retreat began as global bond yields surged to multi-year highs, reducing the allure of alternative investments like digital tokens.
The abrupt fall, following weeks of thin trading, triggered massive liquidations across exchanges. Over the past 24 hours, more than $1 billion in positions were unwound due to falling prices, according to Coinglass data.
Additionally, a Wall Street Journal report citing documents indicated that SpaceX had liquidated its Bitcoin holdings after marking down $373 million. This development weighed heavily on market sentiment.
Josh Gilbert, a market analyst at trading and investment firm eToro, stated, “With limited catalysts to push Bitcoin higher in the short term, a fall below $25,000 could put bears in charge, and if the rout in global risk assets continues, Bitcoin could face further downside.”
The exact timing of SpaceX’s Bitcoin sale remains unclear according to the WSJ report.
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Although broader markets experienced some pullback as the dollar weakened, the slump in digital tokens persisted on Friday amid low liquidity. The top 100 digital tokens gauge plummeted over 5% at one point, surpassing a 0.2% dip in a regional stock index. Ether declined by 1.5%, while Cardano and Solana fell 2.2% and 2.5% respectively.
The largest single liquidation order occurred on Binance, amounting to $55.92 million, as reported by Coinglass. The total volume of Bitcoin liquidations marked the highest for a single day since the market turmoil of June 2022, as per CoinDesk.
Analysts predict that the next support level for Bitcoin is $25,000, and breaching this mark might accelerate liquidations. This level has the most substantial open interest among put options set to expire on August 25, as indicated by Deribit data.
A dip below this level could trigger forced liquidations or hedging by sellers of those put options, further pressuring prices.
The recent decline has nearly wiped out gains recorded after BlackRock’s surprise filing for a Bitcoin ETF on June 15. Bitcoin surged by 72% in Q1 but has retreated by almost 7% since the end of March. Last year, the token tumbled by 64%, marred by industry scandals and bankruptcies.
There was a glimmer of optimism following a report by Bloomberg News, indicating that the US Securities and Exchange Commission might greenlight the first exchange-traded funds based on Ether futures.
The fall in Bitcoin follows a period of narrow trading range for months. Measures gauging the price volatility of the original cryptocurrency have trended downwards, with 90-day volatility reaching its lowest since 2016, according to Bloomberg data.
Shiliang Tang, Chief Investment Officer at crypto investment firm LedgerPrime, said, “There was optimism earlier in the week that a resolution to the Grayscale Bitcoin ETF would come this week but that passed with nothing coming out.
Furthermore, traditional markets have been weak all week with SPX and tech selling off, 10-year rates reaching highs, and the dollar catching a bid, and China credit and econ data weakness, all of which are negatives for risk assets.”
(Original Article Source: Bloomberg)