Crypto Market Crash Today: SpaceX Not Responsible, Here’s The Actual Reason

Bitcoin and the broader cryptocurrency market endured a gut punch this week, with prices plunging sharply amid a confluence of bearish factors.

Over a 24-hour span, Bitcoin crashed as much as 9% below the $25,000 threshold after trading around $28,500 just a day prior. The selloff cut nearly 7% from the total crypto market capitalization.

Multiple narratives emerged around potential catalysts. Some cited unverified rumors that SpaceX sold Bitcoin holdings as instigating the fall. However, the company merely adjusted the book value of assets for accounting purposes, according to the WSJ.

Liquidations, Illiquidity, Macro Factors All in Mix During Market Tumble

More substantively, the bankruptcy of Chinese real estate giant China Evergreen has rattled markets. But professional traders contend neither event fully explains the magnitude of the move.

Instead, market mechanics around leverage and liquidity in futures markets appear to be the primary drivers. Data shows nearly $1 billion in crypto futures positions were liquidated, with most occurring on the OKX exchange.

In relatively illiquid environments, like recently, cascading liquidations can trigger self-reinforcing price declines. As overleveraged longs capitulate, it adds fuel to the selloff.

Additionally, a rapid buildup of open interest set the stage for outsized volatility. When key technical levels broke, the crowded long positioning unwound rapidly.

Lurking in the background are also nagging macroeconomic trends. Rising interest rates have spurred a flight from risky assets broadly, pressuring cryptocurrencies lower.

Looking ahead, on-chain analysts see bearish sentiment persisting amid indicators like rising funding rates on futures. This suggests short sellers are willing to pay premiums to keep pressure on prices.

In totality, the confluence of liquidations, questionable market structure, and hawkish central bank policies proved too much for crypto markets this week. But Bitcoin has weathered perfect storms before. Time will tell whether weaker hands shake out before any durable bottom forms.