The price of Bitcoin slipped by circa 8% in a span of 20 minutes on Aug. 17, causing the classic crypto to tumble below $26,000 — a level not seen since June 20. And as Bitcoin took the deep dive, so too did other leading crypto assets, including Ethereum.
The bloodbath triggered over $1 billion in liquidations, according to data from CoinGlass. That included over $472 million of Bitcoin liquidations and $302 million of ether liquidations. The majority of positions affected were long positions during the rush to the exits.
But the question on everyone’s mind is, did Elon Musk’s SpaceX have anything to do with the unexpected major sell-off in the crypto markets?
SpaceX Wrote Down Bitcoin Holdings By $373 Million
Initial reactions from the Crypto Twitter (X) community have attributed the steep price fall to an unsubstantiated claim that Elon Musk’s aerospace technology company SpaceX supposedly sold all of its $373 million worth of Bitcoin.
However, as per a Wall Street Journal report, SpaceX merely wrote down the value of its BTC stash. In accounting, this is the reduction in the book value of an asset when its fair market value has dropped below the book value. The practice is very common among businesses as it downsizes the value of any holdings for tax purposes.
Others attributed Bitcoin’s Thursday dive to China’s property developer Evergrande Group filing for Chapter 11 bankruptcy in New York.
Real Reason Behind BTC Flash Crash
While the misinformation about SpaceX’s Bitcoin sale might have played a role in the flash crash, other indicators show that a pullback was already brewing.
On-chain analytics platform CryptoQuant pointed out multiple factors that were suggesting a potential price drop. CryptoQuant analysts first noted that the Bitcoin Open Interest was seeing a buildup of short positions since mid-July.
Secondly, the firm observed that the Bitcoin wipe-out was preceded by a period of low demand in the United States. An increase in whale spending activity before the sell-off was also noted as another potential signal. Lastly, CryptoQuant cited the prevailing negative sentiment among traders as a harbinger of the sudden move down.
Bitcoin has slightly recovered to $26,504.02 at the time of publication, possibly buoyed by news the U.S. Securities and Exchange Commission (SEC) is set to approve the first Ethereum Futures ETF product as soon as October.