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August 21, 2023

Over $1B Liquidated as Bitcoin Falls to June Lows

August 21, 2023

The digital asset market witnessed a whirlwind of events last week that led to over $1 billion in liquidations. The centerpiece of this turmoil was Bitcoin, which plummeted by 7% in 5 minutes, flirting with the $25,000 mark, its lowest since June. 

The sudden market upheaval’s origins are shrouded in mystery, from suspicions surrounding SpaceX’s involvement to the unsettling Chapter 15 bankruptcy filing of Chinese real estate giant Evergrande. 

Meanwhile, Ethereum’s story takes an unexpected twist as the United States SEC seems poised to grant approval for Ethereum futures-based exchange-traded funds (ETFs), sparking a swift 11% price surge. 

  • Over $1B liquidated as Bitcoin falls 10%
  • Spacex and Evergrande both blamed for crypto crash
  • SEC set to approve Ethereum Futures ETF

Over $1B liquidated as Bitcoin falls 10%

Cryptocurrency enthusiasts faced a turbulent week as the digital asset market experienced one of the most significant sell-offs this year. 

Coinglass data revealed that traders incurred losses exceeding $1 billion due to liquidations during this tumultuous period. 

The standout in this market upheaval was Bitcoin, the pioneering cryptocurrency, which saw its price plummet by 7% to approximately $26,900. In an earlier dip, it had even touched $25,000, marking its lowest point since June.

Traders who had placed bullish bets found themselves in a dire situation as $821 million worth of long positions were wiped out in the frantic rush to exit the market. 

CoinGlass data indicated that BTC traders bore the brunt of these losses, accounting for approximately $472 million in long liquidations. The second most impacted was ETH with around $302 million in long positions liquidated.

The scope of the liquidations observed had not been seen since June 2022, according to information from Coinalyze. It also coincided with the most bearish day since the collapse of the FTX cryptocurrency exchange.

This downturn has transformed this month’s sluggish market into a veritable bloodbath. 

The alarming trend comes amid concerns over deteriorating foreign currencies, uncertainties in the Chinese economy, and bond yields surging to multi-year highs. 

While leading cryptocurrencies like BTC and ETH bore the brunt of these challenges, other altcoins in the market also sustained double-digit losses, with some hitting their lowest points since the early summer period.

BTC liquidations FTX Nov 2022 vs Aug 2023
BTC liquidations FTX Nov 2022 vs Aug 2023

SpaceX and Evergrande both blamed for crypto flash crash

Thursday marked a challenging day for the crypto community as Bitcoin faced a staggering 10% drop within a mere 5-minute timeframe, sending shockwaves throughout the market. 

Attempting to decode the underlying reasons for this sudden market upheaval, various theories emerged within the crypto community.

Initial concerns arose from a Wall Street Journal article insinuating that SpaceX, spearheaded by Elon Musk, had offloaded its Bitcoin holdings to offset losses. 

The claim was later found to be unverified but likely contributed to the atmosphere of uncertainty that permeated the markets on Thursday.

The cryptocurrency realm was also not immune to the shockwaves emanating from the traditional financial sectors on Thursday, which included the Chapter 15 bankruptcy filing for Chinese real estate giant Evergrande

Due to the size of Evergrande, fears of a potential domino effect were ignited that would inevitably unleash turmoil within the crypto markets.

Others then pointed to the decreasing optimism regarding a Bitcoin Spot ETF.

Earlier in the year, BlackRock’s announcement of its intentions to propose a Bitcoin Spot ETF had infused the market with promise. However, subsequent developments have cast shadows on this positive sentiment, as the prospects of approval appear to dwindle. 

Negativity regarding the topic was amplified on Friday when a decision was not made regarding transitioning Grayscales Bitcoin Trust into a Bitcoin ETF. A decision that could act as the next pivotal catalyst for the cryptocurrency market.

Finally, according to CoinDesk, insights from seasoned traders suggested that the abrupt flash crash on Thursday was largely attributed to the overarching market structure coupled with significant liquidations. 

The inherent scarcity of liquidity within the market has been laid bare for the majority of August, which could be the primary reason why a staggering $1 billion worth of liquidations was recorded in a mere hour.

SEC set to approve Ethereum Futures ETF

Despite the fall in crypto prices on Thursday, Ethereum subsequently witnessed a remarkable 11% surge, propelling its value to $1,700. A dramatic ascent that was ignited by reports suggesting the United States Securities and Exchange Commission (SEC) is poised to grant approval for the debut of Ethereum futures-based exchange-traded funds (ETFs).

According to exclusive insights shared by Bloomberg, the SEC appears to be leaning towards permitting the issuance of ETFs rooted in Ethereum Futures. 

Notably, the regulatory body does not appear inclined to obstruct the applications submitted by nearly a dozen companies, including prominent players like ProShares, Volatility Shares, Bitwise, and Roundhill. These entities have recently filed to launch ETFs grounded in Ethereum’s future performance.

The intricate web of approval, however, still casts uncertainty over which specific ETF applications will earn the regulatory green light. 

Officials did suggest that a selection of these applications could potentially be endorsed as early as October.

Esteemed ETF analyst Eric Balchunas, observing the situation, expressed minimal surprise over the SEC’s inclination towards approving Ethereum futures ETFs. 

Balchunas further noted that this move exemplifies how the regulatory authority’s perspectives on diverse financial products, such as a spot Bitcoin ETF, can organically evolve over time.

The SEC finds itself inundated with a deluge of applications for Ethereum futures ETFs, with over a dozen proposals for such innovative products submitted since the latter half of July. 

This surge in interest underscores the market’s eagerness to integrate cryptocurrency into conventional financial structures.

The reverberations of this news were swift, influencing Ethereum’s market performance within a mere 20-minute span. 

The price rebounded by 11%, restoring its value to an impressive $1,700. This sharp turnaround came in the aftermath of a brief market downturn just hours prior, highlighting the responsiveness of Ethereum’s market to regulatory news.

ETH/USD 15-minute price chart
ETH/USD 15-minute price chart

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