Around 5:30AM in the morning, the cryptocurrency plummeted in the short term. Bitcoin hit a low of $24,715 before recovering above $26,000, with intraday losses extending to more than 7%. Ethereum broke through $1,500 and has now pulled back above $1,650, and altcoins also fell collectively.
The drop pushed bitcoin's market capitalization below $500 billion for the first time since June 16 and hit a new low since June 20. According to CoinGlass data, the slump has resulted in more than $1 billion in liquidations in the past 24 hours, including $472 million in bitcoin liquidations and $302 million in ethereum liquidations, with most of the affected positions being long positions.
The shorts are making a lot of money, and the longs can only choose to cut their meat to close their positions, be forced to liquidate their positions, or inject a large amount of margin to continue to carry orders and wait for a callback. It can be said that some are happy and some are sad. Immediately afterwards, investors began to actively search for the reasons for the plunge in the encryption market.
First, the crypto community attributed some of the decline to a Wall Street Journal report that SpaceX’s balance sheet had written down a record $373 million in Bitcoin for 2021-2022, followed by reports of Musk dumping Bitcoin. Fermentation on social media.
However, some people think that this reason is too far-fetched, because SpaceX’s financial report has a certain lag. Although the news is true, it is not yet clear when the bitcoin will be sold. The market is more infected by panic, thinking that the main force has left the market. A massive sell-off may be on the horizon.
Second, Chinese real estate developer Evergrande filed for bankruptcy protection in the U.S. Since stablecoin issuer Tether owns Evergrande bonds, investors are concerned that problems in the Chinese real estate market may spread to the stablecoin and crypto space.
In fact, the market has been FUD many times on this issue. On June 16 this year, Tether once again denied exposure to Evergrande, and explained that exposure to Chinese commercial paper is mainly concentrated in the banking industry, but the holdings All Chinese paper is liquid and issued by large, well-known issuers in the international commercial paper market, so this reason is also unlikely.
Third, Bloomberg believes that one of the macro factors behind the sell-off is the continued surge in global interest rates, with the US 30-year Treasury rate rising to 4.42%, the highest level since 2011. Its record 22-fold rate hike could hit China first and then spread to the rest of the world. This not only suppressed cryptocurrency prices, but also dealt a blow to risky assets in traditional markets.
Shiliang Tang, Chief Investment Officer of Ledger Prime, a cryptocurrency investment company, said: "Traditional markets have been weak all week, S&P 500 and technology stocks sold off, 10-year interest rates hit highs, the dollar rose, and China's credit and economic data were weak. All of that is bad for risk assets."
Fourth, the U.S. Department of the Treasury announced sanctions against Tornado Cash on Ethereum last year. This sanction will have far-reaching effects in the field of encrypted assets, the legal field, and even the traditional financial field. Judgment against the crypto industry.
Perhaps as the developer of Tornado Cash said, no DeFi app is truly decentralized. Even in the encrypted world, no one can fight against the government. 100% freedom and privacy are just an illusion, and compliance is the only option.
Fifth, the much-anticipated SEC approval of the Bitcoin spot ETF has come to an end, basically postponed until 2024, and it is expected to wait until after the U.S. election to make new moves.
Bitcoin prices have been on a tear in recent weeks, erasing about half of the gains made after BlackRock filed for a Bitcoin ETF. The drop comes after bitcoin's price had been trading in a tight range for the past few months. A measure of cryptocurrency price volatility showed 90-day volatility hit its lowest level since 2016, according to Bloomberg data.
Summarize
Overall, this decline may be the result of a combination of factors. Nowadays, the encryption market has been in a state of low volatility, and investors have become apathetic and exhausted. Although the market fundamentals and improvement trends are positive, it is time to pay more attention to the potential spillover impact of macro and broad events, so it is expected that future market trends will still remain uncertain. optimism.