Last night the price of Bitcoin collapsed below $25,700, but why is it falling? What are the main causes?
The decline started on August 15, falling from above $29,300 to as low as $29,000. The real collapse occurred yesterday. However, it’s important to note that Bitcoin has experienced collapses like these numerous times in its fourteen-year history. The magnitude and speed of the decline are within the normal volatility of the asset.
Why the price of Bitcoin is falling: the volatility factor
The key point is the volatility. From July 21 to August 15, the price of BTC fluctuated within a compressed range, showing record lows in volatility. Many expected a sharp jump up or down. Additionally, historically, August usually sees an increase in volatility.
The other markets
Bitcoin is considered a risk-on asset, similar to the stock market. Recently, the stock market has been suffering, with the Nasdaq losing 7% in the past 30 days. The comparison with the Hong Kong Stock Exchange’s Hang Seng Index (HSI) is also interesting, as it has lost 11% in the last thirty days, similar to Bitcoin.
The selling pressure
The collapse yesterday was caused by massive sales of BTC. The macroeconomic situation is uncertain, leading to fear among investors. This fear triggered panic in the crypto markets and resulted in massive selling. The bankruptcy of Chinese real estate giant Evergrande also had an impact on Bitcoin’s price.
Hot Take
The recent decline in Bitcoin’s price is not unusual given its history of volatility. The correlation between the stock market’s performance and Bitcoin’s price is worth analyzing. The fear of further collapses and the bankruptcy of Evergrande contributed to the selling pressure. It remains to be seen if the worst is over and if China can contain the crisis.
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