Cryptocurrency prices took a nosedive as investors sold off over $1 billion worth of digital coins on Thursday following reports of Elon Musk’s SpaceX offloading its bitcoin holdings. This led to bitcoin experiencing a 7.2% drop, its biggest one-day decline since the collapse of FTX exchange in November 2022. Subsequently, bitcoin fell to its lowest point in two months, reaching $26,172 during Asian trading hours on Friday. Analysts believe the sell-off was influenced not only by SpaceX’s actions but also by the impact of rising interest rates on risky assets like stocks.
By Friday, bitcoin was trading at $26,441, a 0.8% decrease for the day. Ether, the second-largest cryptocurrency, remained stable at $1,685.20, despite also experiencing a significant drop on Thursday. SpaceX, owned by crypto enthusiast Elon Musk, reportedly reduced the value of its bitcoin holdings by $373 million before selling them off, as revealed by internal financial documents cited by the Wall Street Journal. Tesla, Musk’s electric car company, also sold off 75% of its bitcoin holdings last year, which was viewed as a lack of confidence from the tech mogul known for promoting meme coin dogecoin.
The news of SpaceX’s actions served as the immediate trigger for the bitcoin sell-off, according to Ben Laidler, global markets strategist at eToro. However, Laidler emphasized that the broader reason behind the decline is the general risk aversion across asset classes, affecting crypto assets as well. Joseph Edwards, head of research at Enigma Securities, attributed the drop in bitcoin’s price to low volatility and a lack of interest from retail investors.
Following a significant surge during the pandemic, where the value of bitcoin exceeded $60,000, cryptocurrency has been experiencing a prolonged slump. The recent sell-off compounded the challenges faced by the crypto market. In November 2021, the combined value of digital coins reached nearly $3 trillion, but as of Friday, the total market capitalization, including stable coins and tokens, was slightly over $1 trillion.
Legal and regulatory setbacks have also rocked the crypto community. FTX, once the second-largest cryptocurrency exchange globally with an estimated market capitalization of $32 billion, went bankrupt after its founder, Sam Bankman-Fried, allegedly used customer deposits to cover risky hedge fund bets. Bankman-Fried, currently in jail awaiting trial for fraud and money laundering charges, has pleaded not guilty. Additionally, Coinbase, the largest crypto exchange platform in the US, is being sued by the Securities and Exchange Commission (SEC) for operating illegally without registering with the regulator. The SEC has also targeted Binance, the world’s largest crypto exchange, accusing it of operating a “web of deception.”
Overall, the combination of SpaceX’s bitcoin sell-off, increasing interest rates affecting risky assets, and ongoing legal and regulatory challenges has created a turbulent environment for the cryptocurrency market.
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