James Butterfill, Head Of Research at CoinShares, has shared the firm’s thoughts on what’s behind the recent Bitcoin price crash:
Butterfill notes that the recent crash may have been “prompted by the market realizing that the SEC approval of a Bitcoin ETF in the US isn’t imminent.”
It may also be due to fears over “the economic downturn in China gathering pace as deflation sets in, although this could ultimately be supportive for Bitcoin if the financial sector is significantly affected.”
The CoinShares team added that Bitcoin volumes “have been very low, US$2.3bn per day compared to US$11bn per day at the beginning of this year, so markets are much more sensitive to larger trades.”
The team also noted that Bitcoin matched its lowest 30d volatility on record and that “this has historically preceded violent price moves.”
The CoinShares team added that SpaceX recently “wrote down US$373m Bitcoin as evidenced in their recent SEC filing.”
And 30-year rates “hit their highest level in 20 years,” and Bitcoin has often “been the first to act in recent years, so this may be preceding a broader crash in other asset classes.”
While one particular event might not be solely responsible for the crypto market crash, it is becoming evident that the Bitcoin and larger digital currency markets are not immune to issues impacting the broader financial sector. In addition to the collapse of several traditional banking institutions in the past year, the world has been subjected to record levels of inflation following the COVID-19 outbreak.
Moreover, socioeconomic uncertainty and the Russia/Ukraine crisis have continued to impact the global economy negatively. These major issues have also shaken up the volatile crypto space, which has not yet recovered from the spectacular collapse of FTX and other major crypto firms such as Celsius.
The US Securities and Exchange Commission (SEC) has also taken an overly aggressive stance towards the crypto sector and the firms that operate within this nascent industry. However, companies like Ripple, and Coinbase, among many others, are battling hard to move this industry forward in a meaningful manner. The upcoming year could bring more positive developments that could benefit both individual consumers and business organizations.