Bitcoin (BTC) rapidly declined 9% on Thursday, momentarily slipping below $25,000 on Binance. Rumors about the massive sale of Bitcoins by Elon Musk‘s SpaceX fueled the downward pressure. The tranquility that had characterized much of August was suddenly disrupted by a market downturn, driven by a heightened risk aversion from Wall Street. Ether (ETH) also crashed by 11% to approximately $1,600.
According to an Aug. 17 report in The Wall Street Journal, SpaceX recorded $373 million worth of Bitcoin BTC $26,550 holdings on its balance sheet in 2021 and 2022 and has reportedly sold the cryptocurrency.
This sudden shift can largely be attributed to the persistent surge in global interest rates, particularly within the United States. According to Bloomberg, the 30-year Treasury bond surged to 4.42%, marking its highest level since 2011. Similarly, the 10-year yield reached 4.32%, coming within a basis point of a 15-year high. This surge in bond yields created a downward pressure on cryptocurrency prices and various risk assets. While currently maintaining stability, the Nasdaq witnessed a decline of approximately 6% throughout August.
In a market report issued on Thursday morning, macro analyst Noelle Acheson observed, “Higher bond yields signal a weaker investment case for equities. Tighter credit leads to lower growth, higher discount rates bring down cash flow valuations, and the equity risk premium has plummeted to 2007 levels.”Acheson further highlighted, “Higher bond yields also suggest a weaker investment case for non-yielding assets such as BTC and gold.
Regardless of the strong argument for hard assets, yield remains yield, and BTC and gold lack this aspect. “Despite the optimism surrounding the potential approval of a spot bitcoin ETF by the U.S. Securities and Exchange Commission (SEC), uncertainty looms due to the uncertain timeline for decision-making on the numerous applications currently pending.
Another potential positive influence could emerge from a favorable court ruling in favor of Grayscale, the entity responsible for the Grayscale Bitcoin Trust (GBTC). This lawsuit aims to secure approval for the conversion of the trust into an ETF. While an expected ruling date has passed without resolution, attention is now focused on the possibility of a ruling on Friday. The recent downward volatility in BTC can be attributed to the U.S. Commodity and Futures Trading Commission’s (CFTC) commitment of traders (COT) report, revealing that leveraged funds, including hedge funds and commodity trading advisors, escalated their bearish positions in CME-listed cash-settled bitcoin futures during the week ending on August 8.
The crypto market seems unresponsive to recent positive developments within the cryptocurrency sector, including the launch of a stablecoin by PayPal and various applications for futures-based exchange-traded funds (ETFs) tied to Ether (ETH). David Lawant, head of research at FalconX, an institutional trading desk, emphasized the importance of monitoring potential spillover effects from macroeconomic factors onto broader risk assets and the crypto market, despite ongoing improvements in crypto trends and fundamentals.
The renewed downward trend in Bitcoin’s price aligns with its historical pattern of interim peaks following significant rallies, analogous to the behavior of meme coin SHIB. This “dogecoin-killer” saw a surge of over 20% in the initial 12 days of the month, driven by optimism surrounding the launch of a layer 2 Shibarium, aimed at reshaping the cryptocurrency’s image as a key industry participant. Since August 12, SHIB has retreated by 18%, with a recent 9% price drop in the past 24 hours alone, coinciding with a turbulent initiation for Shibarium.
