Bitcoin Could Fall Another 25%. Will Elon Musk and SpaceX Be to Blame?

The price of Bitcoin has dropped 7% over the past 24 hours to $26,550, having fallen below $25,500 in the trough of recent trading, which marks the largest crypto’s deepest level since mid-June. Bitcoin began the week near $29,500, in the midst of a range that held for weeks in a period that has seen the lowest volatility in the token’s history. Bitcoin has lagged excitement seen in the stock market—where the
Dow Jones Industrial Average
and
S&P 500
have been bumpy. Traders have been betting the low volatility would soon end, though they certainly weren’t hoping for such a dramatic downside move.

“Bitcoin has plunged in recent days, and I think we could have further to fall. Volumes are just really low and retail buyers are certainly not yet entering the market in a substantial manner,” said Andrew Lawrence, CEO of custody group Censo and a former partner at crypto hedge fund Pantera Capital.

The selloff has created carnage across the crypto derivatives space, where leveraged trading in Bitcoin perpetual futures represents the most liquid market in all of digital assets.

Almost $500 million in bullish bets on Bitcoin’s direction have been wiped out, or liquidated, on exchanges in the past 24 hours, according to data from crypto data provider CoinGlass, representing among the biggest futures losses this year.

Could Elon Musk be at least partly to blame? The
Tesla
(ticker: TSLA) CEO has long been an outspoken proponent of crypto, but The Wall Street Journal reported Thursday that his private SpaceX company wrote down the value of the Bitcoin it owns by $373 million last year and in 2021 and has sold the token.

While there could be a more mainstream explanation—other risk-sensitive assets, like equities, also have sold off amid a surge in bond yields as investors fret over inflation and interest rates—the finger-pointing at Musk is gathering pace.

“SpaceX’s writedown of crypto-assets has everyone pointing the finger at Musk for Bitcoin’s plunge. Elon has always had an outsized hand in crypto markets,” said Antoni Trenchev, co-founder and managing partner at crypto lender Nexo.

With Bitcoin well below a number of key technical levels, traders are watching price action closely to see where losses could escalate. In focus is whether Bitcoin can regain its 200-week moving average around $27,400.

“It doesn’t look good that Bitcoin has dropped below its 20-, 50- and 200-day moving averages, and now you’d want it to stay above the last big mid-June low of $24,800,” said Trenchev. “If $24,800 doesn’t hold, you are looking at $23,000 and then $20,000 comes into play.” A fall to $20,000 would represent declines of about another 25% from current levels.

Beyond Bitcoin,
Ether
—the second-largest crypto—fell 6% to below $1,700. Smaller tokens or altcoins were similarly weak, with
Cardano
crumbling 4% and
Polygon
plunging 6%. Memecoins were unspared, with
Dogecoin
down 7% and
Shiba Inu
shedding 6%.

Write to Jack Denton at [email protected]