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Bitcoin price plummets below $26k amid SpaceX selling rumors, Evergrande bankruptcy, macro and market concerns

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(Kitco News) - Bitcoin and the broader crypto market went into freefall late Thursday, with the top cryptocurrency losing $2500 and the digital currency market seeing over $1 billion in liquidations in less than 24 hours. On Friday, market participants were attempting to piece together what sparked the sudden selloff while also trying to determine how low crypto might go after BTC briefly dipped below $26,000.

The dramatic decline took markets by surprise as it came after a weeks-long stretch of narrow range trading for BTC and days of historically low volatility that brought volumes down. On Wednesday, Bitcoin failed to hold support above $29,000 shortly after 4 PM EDT, which sparked the beginning of a new downtrend, but bulls managed to maintain a floor above $28,400.

When Bitcoin broke definitively below $28,000 shortly after 11:30 AM EDT on Thursday, however, it fell all the way to $27,789 before buyers attempted to hold the line for the next few hours. But the selling pressure proved too much and shortly after 5:30 pm, BTC collapsed over $1000 in just a few minutes, sparking widespread panic in the crypto markets as analysts and traders tried to understand what was happening, and what would come next.

SpaceX and Elon Musk

One of the key instigators for panic was a Wall Street Journal article published on Thursday about Elon Musk's SpaceX, which included a brief paragraph about Bitcoin at the very end of the article in a section discussing the company's finances.

"The documents also show SpaceX wrote down the value of bitcoin it owns by a total of $373 million last year and in 2021 and has sold the cryptocurrency," it read. "Tesla has taken a similar approach with its bitcoin holdings. Musk has posted about cryptocurrencies frequently over the years."

Market participants were divided on what exactly that meant: Did the company simply write down the value, or did it sell that amount? Did it actually sell its entire BTC stake since? Did this mean Musk was out on Bitcoin altogether?

Evergrande and China concerns

Later in the afternoon, another major event rocked both crypto and traditional markets: The announcement that Chinese commercial real estate giant Evergrande was filing for bankruptcy in the United States. While the Chapter 15 bankruptcy filing is big news for the beleaguered commercial real estate sector in China and around the world, it was seen as particularly threatening for crypto, as many have speculated that Tether's USDT, the largest stablecoin by market cap and a lynchpin of the entire digital assets ecosystem, is heavily backed by Chinese commercial paper. And even if that proves to be untrue, the filing still caused a massive move away from risk-on assets, which impacts Bitcoin and crypto in general.

Market and macro causes

Many market participants aren't pointing the finger at Musk, and they see Evergrande as an exacerbator of something that was already well underway rather than an instigator. They point instead to medium-term shifts in market behavior based on broader macroeconomic concerns, which reached critical mass over the last few days.

Brian Evans, CEO and founder of digital assets and artificial intelligence investment firm BDE Ventures, told Kitco News that there are many things feeding into the current crypto downturn.

“There might be multiple reasons that explain this big selloff with Bitcoin, and I’m not certain it has anything to do with news that SpaceX might – emphasis on might – have sold off its BTC balance,” he said. “Basically, volumes had contracted significantly, and we haven’t been seeing much new retail participation in the space. If anything, this event seems to be largely driven by a flushing out of leveraged positions, which happens periodically with BTC and in rather dramatic fashion.”

Evans said that one interesting aspect of the selloff is how many altcoins have held up relatively well compared to Bitcoin. “Usually, in these kinds of scenarios, you see altcoins sell off in a much more pronounced way relative to Bitcoin,” he said. “This could have something to do with news that a futures ETF for Ethereum might get approved. This might have something to do with other blockchain ecosystems like Ethereum and Solana garnering more and more network effects, meaning that they have more and more committed users who are becoming less prone to selling during times of turmoil.”

He believes that regardless of the particular causes or mitigating factors for Bitcoin’s sudden collapse, the market is in for more volatility in the near term. “The macroeconomic backdrop just seems rather uncertain at the moment, with interest rates still really high and mounting signs of slowing economic growth more generally,” Evans said. “In short, I think there’s a lot of caution among market participants now.”

Markus Levin, co-founder of XYO Network, told Kitco News that he doesn’t see a floor for BTC in the near term. “I suspect that Bitcoin could fall further because the economic situation globally is just so precarious. China appears to be in a deep recession and interest rates in the United States are still relatively very high.

Levin expects the current BTC selloff will continue because retail investors lack the ammo to step in and support the cryptocurrency even if they wanted to.

“I don’t think retail has all that much discretionary income to invest in digital assets at the moment,” he said. “What will be interesting to see is whether or not big institutional buyers are going to scoop up relatively cheap Bitcoin. That seems to be the case, especially since a spot ETF for BTC seems very likely and also because BlackRock and Fidelity are involved in those ETF applications.”

Bitcoin broke through $26K shortly after 10:45 AM EDT, setting a session low at $25,996. BTC last traded at $26,000 exactly, down 2.41% on the session and 12% on the week.

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