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There are numerous theories about the rapid decline in Bitcoin price. One of them was about Grayscale. However, the team wrote that the decline was not directly related to them on the evening of August 18th. They also shared their own theories. So what do experts think about the recent price fluctuations?
Grayscale and Cryptocurrencies
In the ongoing lawsuit filed by Grayscale Investments against the Securities and Exchange Commission, no decision has been reached. Many experts were pointing to Friday for a decision on the spot bitcoin ETF plans. The recent crash is associated with this expectation.
With all this excitement, over $1 billion in leveraged positions were liquidated in the past 24 hours, and the liquidation of long positions sent Bitcoin below $26,000 for the first time in two months. According to CoinGecko, the price of Bitcoin fluctuated throughout the day on Friday, mostly staying around $26,000.
Grayscale, in a report released on Friday, stated that the declines seemed to be related to “macro factors.” They argued that it was not related to the ongoing SEC lawsuit.
“We suspect that synchronized selling in stocks and fixed income eventually spreads to crypto as cross-asset investors reduce portfolio risk. While there have been various positive developments in the crypto asset sector in recent months, the macro market backdrop remains challenging and may continue to be a source of volatility in prices.”
Bitcoin Predictions by Experts
Analysts spent the day searching for the reasons behind all of this. Some news headlines pointed to a report by the Wall Street Journal that indicated SpaceX sold its bitcoin holdings after losing $373 million. Others blamed the Fed following the hawkish signals in Wednesday’s FOMC minutes.
The timing of the overnight drop coincided with news that China Evergrande filed for bankruptcy protection in the US. However, according to K33 Research, none of these narratives can explain the timing or sharpness of the drop.
Analysts said:
“This was evidenced by a large amount of liquidation followed by a drop in open interest.”
K33 pointed to on-chain data showing that $1.3 billion worth of open interest in the derivatives market (50,000 BTC) was wiped out within a few hours.
“If anything, the liquidation of longs and increased shorting could lay the groundwork for an upcoming short squeeze.”
Lucas Kiely, the head of investments at Yield App, supported K33’s analysis.
“Bitcoin and Ether have already started a recovery today, indicating that sharp drops were liquidation events. Rising bond yields in the US and China Evergrande’s filing for bankruptcy protection in the US affected the Chinese yuan and indirectly hit bitcoin sensitivity.”
Looking at the bright side, BTC volatility is increasing, indicating that the boring sideways period is temporarily over. A possible short squeeze is what the bulls are longing for these days.
