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Bitcoin drops below $26,000: ties with Elon Musk and what's next

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Between August 14 and August 18, 2023, Bitcoin decreased by 13%. Over the past year, the market has only gone through one similar drop when the largest crypto exchange, FTX, went bankrupt — a historical shock for the whole crypto industry. Back then, in November 2022, BTC saw a 30% decline.

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Number 1 on the chart shows the extent of Bitcoin's August 2023 drop; number 2 is the BTC's response to the FTX collapse in November 2022.

We have identified five possible reasons for the recent decline in Bitcoin's value.
 

Why did Bitcoin drop: 5 reasons

1. SpaceX’s sale of its Bitcoin assets

On August 17, The Wall Street Journal published a review of financial reports from SpaceX, the aerospace manufacturer founded by Elon Musk. The report indicated that the organisation wrote down (not sold) $373 million worth of Bitcoins, acknowledging the devaluation. Though the exact amount of coins sold remains unknown. 

Besides all his other positions, Elon Musk is a prominent crypto community influencer. Piplsay analysts state that 37% of American investors make investment decisions based on Musk's tweets. Thus, the announcement from SpaceX's team could have triggered a sell-off in the crypto market. 

Notably, Elon Musk himself invests in Bitcoin, Ethereum, and Dogecoin. Moreover, his other company, Tesla, also holds crypto assets. In July 2022, Tesla sold 75% of its Bitcoins, which led to BTC dropping from $23,000 to $20,000.

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Tesla holds third place in the top 5 largest Bitcoin investors among public companies. As of the time of writing, Tesla has 10,725 BTC.
 

2. The US SEC's approval of appeal against Ripple

The Wall Street Journal believes that now the watchdog will be able to obtain recognition of Ripple's guilt.

The SEC (Securities and Exchange Commission) accuses the project of illegally issuing and distributing securities in the form of XRP tokens. The legal battle started in December 2020.

In July 2023, a court ruling found that XRP private sales had not violated securities law. However, the judge considered it illegal to sell crypto to institutional investors.

The SEC's appeal victory would enable the regulator to reevaluate its previous decision. This means the watchdog could potentially get a second chance to prove that XRP private sales are illicit. Such an outcome is dangerous for other 68 cryptocurrencies labelled as unregistered securities by the SEC. 

BTC is not on the list, but this can possibly affect the whole market.
 

3. The US Federal Reserve is ready to tighten its financial policy

The US Federal Reserve System (FRS) claimed a sluggish inflation decline rate, implying future key rate hikes.

The key rate is the minimum percentage at which private banks can borrow money from the FED. Additional key rate hikes slow down the economy as people are forced to save rather than spend. This might lead to a stock market downturn, echoing repercussions in the crypto market. Uncertain signals of possible key rate hike in the US are definitely bad news for the crypto industry.
 

4. Evergrande's bankruptcy

News of the Chinese property developer’s instability spread across the media on August 17. Evergrande's issues could indirectly put pressure on Bitcoin. It would increase the possibility of another round of crisis within the Chinese financial system and the entire global market at large. 

The following day, the company clarified the situation and claimed that it filed for debt restructuring, not bankruptcy. However, it had already been late for halting the sell-off. 
 

5. A decline in optimism for US Bitcoin ETF launch

In the early summer of 2023, companies resumed the race to launch a spot Bitcoin ETF in the United States. This tool aims to simplify crypto investment for entities that cannot buy digital assets directly. 

While the news attracted crypto investors, the SEC began to delay the processing of applications. Thus, the uncertainty surrounding the launch of the spot Bitcoin ETF in the US has tempered optimism within the crypto community.

By the way, the itez editorial team has already found out when to expect the Bitcoin spot ETF approval in the US.
 

What’s next for Bitcoin?

Historically, August is not the best month for Bitcoin, as BTC usually spends it experiencing drops. This time is no exception.

Bitcoin’s past has already seen similar, if not deeper, declines. Though, notably, after every decrease the coin consistently rebounded and headed for all-time-high (ATH) updates. The secret behind BTC's positive dynamics is halvings, which reduce its mining speed and split the mining rewards by half. It may be assumed that Bitcoin does not get cheaper over time but instead only rises in price due to the halving process.

Earlier, we explored the next possible Bitcoin's ATH. The Bitcoin price prediction for September is coming, so stay tuned.

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You may also like:

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What's the deal with SEC chair Gary Gensler?

Next Bitcoin all-time high prediction

This article is not an investment recommendation. The financial transactions mentioned in the article are not a guide to action. Itez is not responsible for possible risks. The user should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about making any operations with cryptocurrency.

Maria Kachura
Maria Kachura

Visit her on Facebook or hit her up via Email.

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