Crypto Market Sell-Off: Bitcoin Hits Two-Month Low

Bitcoin, the world’s most valuable cryptocurrency, experienced a significant drop below $26,000 on Thursday, marking its lowest level since June. This decline was part of a broader crypto market slump triggered by news that Elon Musk’s SpaceX had written down the value of its Bitcoin holdings by $373 million and subsequently sold off its cryptocurrency assets. The impact of Musk’s involvement in the crypto market has been well-documented, with his tweets often causing significant price movements. Notably, Tesla, another company led by Musk, had previously disclosed the sale of 75% of its Bitcoin holdings in an earnings report last year.

c, the second-largest cryptocurrency, also suffered a similar hit, falling to $1,680, down 6.6% in the previous 24 hours. Additionally, other major tokens like Binance’s BNB, Cardano, and Solana experienced losses of over 6%.

Altcoins lead the cryptocurrency market decline on Thursday. The CoinDesk Market Index (CMI) recorded a 1.3% drop, primarily driven by losses in altcoins such as Ripple’s XRP, Dogecoin, Polkadot’s DOT, Polygon’s MATIC, and Uniswap’s UNI, all of which saw losses exceeding 4% over the past 24 hours. However, major cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) managed to limit their losses to less than 1%.

Analysts attribute the recent crypto market decline to multiple factors. The Wall Street Journal’s report on SpaceX’s Bitcoin holdings and subsequent sale is considered the immediate catalyst for the sell-off. However, the broader driver is the risk-averse sentiment prevailing in global markets, affecting various asset classes. Low volatility and a lack of enthusiasm from retail investors are also contributing factors to the downturn.

An additional possible contributing factor is the release of the U.S. retail sales report for July, which exceeded expectations. The strong retail sales data has led to projections of a robust 5% GDP growth in the third quarter, reducing the likelihood of the Federal Reserve halting interest rate hikes or considering rate cuts. OANDA Senior Market Analyst Ed Moya suggests that the crypto market’s decline may be linked to a resumption of the bond market selloff, causing global bond yields to rise and increasing the risk of central bank tightening.

The broader impact of the economic news was evident in the performance of traditional markets. The Nasdaq, S&P 500, and Dow Jones Industrial Average all experienced declines of over 1% on Thursday, accompanied by rising 10-year and 30-year U.S. Treasury rates, reaching new highs for 2023.

Bitcoin had been hovering around $30,000 in recent months, showing gradual recovery after the significant drop in 2022. The market received a boost in June when BlackRock applied to launch a spot Bitcoin exchange-traded fund (ETF) in the United States. This move raised hopes that the U.S. Securities and Exchange Commission would approve similar applications from other asset managers, including Grayscale.

However, concerns are now rising that the recent market decline may be a result of anticipatory actions related to Grayscale’s lawsuit against the SEC. The outcome of this lawsuit has been a source of optimism for the market throughout the summer, potentially inflating prices.