It is a red day for the market.
Bitcoin, the flagship cryptocurrency has set a bearish tone for the market with a +10% dip in the weekly timeframe, and a 7% dip over the last 24 hours.
Bitcoin has surpassed all expectations negatively and is now trading somewhere around $26,400 according to CoinMarketCap.
A good look at CoinGlass shows that 176,739 traders with over $500 million in BTC trades have been liquidated over the last 24 hours, with the majority ($386 million) coming from traders who opened longs.
So what exactly is going on, and why has Bitcoin suddenly decided to take a nosedive, right after spending weeks in a sluggish state?
Sometime on 17 August, volatility suddenly returned to the market as BTC began to sink.
According to buybitcoinworldwide, BTC suddenly changed direction from its extremely low 30-day volatility score of 0.65% to about 0.86 where it now sits.
Bitcoin currently sits at its lowest point in over two months, after an overextended consolidation, and many have assumed that this has something to do with Tesla.
Tesla and Elon Musk have always had some degree of influence over the crypto market.
Remember that in November 2021 when the bear market first started, the first dip that took Bitcoin from its $29,000 ATH to the $40,000 zone was partly caused by concerns raised by Tesla about Bitcoin's "carbon footprint" and its effect on the environment.
This time around, Bitcoin's dip may have been caused by speculation that Tesla and Space X (both owned by Musk) sold hundreds of millions worth of BTC they had in 2022 and 2021.
Musk, in 2021, publicly announced that Space X had purchased a certain amount of Bitcoin, with plans to buy another $1.5 billion worth soon. Because of this, BTC rallied back in 2021, to break out from the $40,000 zone.
According to a report published by the Wall Street Journal on Thursday this week, Space X also declared that it owned about $373 million worth of BTC in 2021 and 2022.
However, in the second quarter of 2022, according to Tesla, it sold more than 30,000 bitcoins for $936 million, or nearly 75% of its initial $1.5 billion in bitcoin holdings.
In the company's second-quarter 2023 financial report, data also showed that the company has sold all of its Bitcoin assets, leaving only $184 million.
This relatively massive selloff in the last two years may have contributed to Bitcoin taking its current nosedive, straight down to the $26,000 zone.
According to a recent blog post published on CryptoQuant on Friday this week, Bitcoin just breached the primary support level that corresponds to the realized price of short-term holders.
What does this mean?
In simple terms, it's safe to say that the $28,000 zone was a strong support for Bitcoin short-term holders.
When Bitcoin broke through this level to the underside, these holders immediately started selling their holdings, leading to the cascade that sent the cryptocurrency down by over 7%.
This blog post cited the UTXO (Unspent Transaction Output) age bands and came up with a few conclusions.
Because of this, it is safe to assume that the selloff was due to panic among the short-term holders.
CoinMarketCap's bitcoin fear and greed index shows a relatively strong degree of fear in the market.
Bitcoin's market cap is also back to struggling a few inches above the $1 trillion mark, and the market at large is a sea of red.
In the charts, we can see that BTC broke through the $28,000 resistance to the $26,300 zone.
However, the bears had enough momentum to completely escape the bulls and dragged BTC straight down to $25,138.
The RSI is deeply oversold, showing that the bears have more than a strong degree of control over the market.
Things do not look so good on the daily chart either.
As illustrated above, Bitcoin has broken through the ascending trendline it has been on since the start of the year, and now has a very good chance of going further under.
However, the $25,000 zone offers some degree of support.
The real tragedy would be if Bitcoin goes ahead and breaks through $25,000.
When this happens, Bitcoin will inevitably drop straight down to the $20,000 zone and erase all of its gains from mid-March until date.
In all, the support zone to keep an eye out for would be $25,150 – $25,000.
How low can Bitcoin go? It all depends on this zone.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.