Bitcoin plunge as Musk SpaceX sale is reported

Cryptocurrencies extended declines, sliding with global risk assets as investors price in higher interest rates for longer. A report of Elon Musk’s SpaceX selling Bitcoin holdings added to the concerns. 

Bitcoin fell 4.4% at 9 a.m. in London on Friday, and was headed for its biggest weekly decline in three months, after touching a low of $25,314. The largest cryptocurrency started retreating from $28,947 a day earlier as global bond yields hit multi-year highs, reducing the appeal for alternative investments such as digital tokens.

The sudden fall after weeks of thin trading sparked massive liquidations across exchanges. More than $1 billion of positions were unwound in the past 24 hours as prices fell, according to Coinglass data. A Wall Street Journal report citing documents that SpaceX has sold off its Bitcoin holdings after writing down $373 million also weighed on sentiment.

“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,” said Josh Gilbert, market analyst at trading and investing firm eToro.

It wasn’t clear from the WSJ report when SpaceX had sold its Bitcoin.

While broader markets are seeing a pullback in the selling as the dollar weakened, the selloff in digital tokens amid thin liquidity continued unabated on Friday. The top 100 digital tokens gauge fell more than 5% at one point, outstripping a 0.2% decline in a regional stock index. Ether slipped 1.5% while Cardano and Solana fell 2.2% and 2.5%, respectively. 

The largest single liquidation order happened on Binance, and was worth $55.92 million, Coinglass said in its website. The total amount of Bitcoin liquidations was the biggest for a single day since the market turmoil of June 2022, CoinDesk reported. 

The next support level for Bitcoin is $25,000 and a breach may accelerate liquidations, according to analysts. That level has the highest level of open interest among put options for Aug. 25 expiry, according to data from Deribit. Should Bitcoin drop below that level, sellers of those puts would be forced to liquidate or hedge their positions, putting further pressure on prices.   

ETF Support

The slide has almost erased the gains registered in the wake of BlackRock’s Inc.’s surprise filing for a Bitcoin ETF on June 15. After surging 72% in the first quarter, Bitcoin has declined almost 7% since the end of March. The token tumbled 64% last year amid a series of industry scandals and bankruptcies. 

Some degree of optimism crept into the market after Bloomberg News reported that the US Securities and Exchange Commission is poised to allow the first exchange-traded funds based on Ether futures.

The drop in Bitcoin follows a period in which the cryptocurrency traded in a narrow range for months. Gauges that measure the price swings of the original cryptocurrency have been trending down, with the 90-day volatility reaching its lowest since 2016 this week, according to data compiled by Bloomberg.

“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,” Shiliang Tang, chief investment officer at crypto investment firm LedgerPrime, said. “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.”