What Caused Bitcoin’s 10% Crash: Matrixport? Jim Cramer? Leverage?

Bitcoin’s

(BTC)

swift
Wednesday
decline
reminded
investors
of
the
asset’s
downside
volatility,
with

observers
quickly
pointing
to
a

research
report
predicting
rejections
for
highly-anticipated
spot
BTC
exchange-traded
funds
in
the
U.S.
and
even
CNBC
host
Jim
Cramer’s
comments
as
potential
triggers,

However,
overzealous
bullish
bets
on
a
continued
rally
primed
the
market
for
a
pullback,
analysts
told
CoinDesk.

BTC
dropped
to
a
low
of
$40,800
from
around
$45,000
within
hours
during
early
Wednesday,
CoinDesk
Indices
data
shows,
roughly
around
the
time
when
Singapore-based
digital
asset
firm
Matrixport
published
a
report
penned
by
Markus
Thielen
forecasting
the
U.S.
Securities
and
Exchange
Commission
to
reject
all
spot
bitcoin
ETF
applications,
overturning
its
Tuesday
outlook
projecting
an
imminent
approval
and
a
BTC
rally
to
$50,000.

Jihan
Wu,
co-founder
of
Matrixport,
said
the
report
was
unlikely
to
trigger
the
crash
and
pointed
out

weakness
in
crypto-related
stocks
over
the
past
days,
potentially
foreshadowing
faltering
momentum
for
digital
assets.

“It’s
unrealistic
to
believe
that
a
Matrixport
report
could
trigger
a
trillion-dollar
size
market
to
crash,”
Wu

posted
on
X
Wednesday
late
afternoon
UTC
time.

“We
also
experienced
an
unexpected
drop
in
crypto
stocks
for
consecutive
trading
days,
while
Bitcoin’s
price
remained
stable,”
Wu
added.
“These
events,
predating
Markus
Thielen’s
report,
appeared
to
have
less
impact
and
got
less
attention.”

Analysts

refuted
Matrixport’s
contrarian
argument,
saying
there
was
no
evidence
that
the
regulators
would
reject
the
applications
and
giving
higher
odds
for
an
eventual
approval.
Consequently,
bitcoin’s
price
recovered
from
Wednesday’s
lows
to
around
$42,900
by
afternoon
UTC
time,
but
was
still
trading
nearly
5%
lower
over
the
past
24
hours.

The
rapid
decline
came
within
a
day
of
CNBC
host
and
former
hedge
fund
manager

Jim
Cramer’s
positive
comments
about
bitcoin,
walking
back
on
his
negative
outlook
in
October.
While
it’s
unlikely
to
be,
observers

didn’t
fail
to

single
out
his
comment
in
hindsight
as
a
sign
for
falling
prices,
riffing
on
a
popular
meme
of
Cramer’s
internet-famous
track
record
of
backfiring
takes.
(For
instance,
BTC
is
still
up
roughly
60%
since
his
October
remark.)

Read
more:



Jim
Cramer
Doesn’t
Know
Bitcoin

K33
Research
Senior
Analyst
Vetle
Lunde
said
the
market
was
overheated
and
over-leveraged,
leaving
it
highly
vulnerable
to
the
downside.

“Leverage
in
the
market
was
very
high
prior
to
the
crash,
with
longs
being
the
key
aggressor,
evident
by
funding
rates
and
futures
premiums
pushing
to
annualized
rates
above
50%,”
Lunde
explained
in
an
interview
via
email.
“This
left
the
market
extremely
exposed
to
downside
volatility.”

Matrixport’s
out-of-consensus
report
served
as
an
adequate
catalyst
to
unwind
overleveraged
positions
leading
to
cascading
liquidations,
exacerbating
the
downfall.
Nearly
$560
million
of
leveraged
long
derivatives
trading
positions
–
bets
on
higher
prices
with
borrowed
money
–
has
been
wiped
out
through
Wednesday
until
press
time,
the
highest
amount
in
at
least
three
months,

CoinGlass
data
shows.

“It’s
a
typical
long
liquidation
flush,”
Lunde
said.

Digital
asset
research
firm
CryptoQuant
also
attributed
the
decline
to
exceptionally
high
funding
rates
on
the
bitcoin
futures
market,
adding
selling
pressure
from
bitcoin
miners
and
high
profit
rates
of
short-term
holders
as
contributing
factors.

CryptoQuant
analysts
last
week
said
that
a
spot
bitcoin
ETF
approval
is
likely
to
happen
and
potentially
be
a
“sell
the
news”
event
that
could
pull
BTC
to
$32,000.

LMAX
strategist
Joel
Kruger
said
in
an
emailed
note
that
the
overwhelming
consensus
is
that
an
approval
for
a
bitcoin
ETF
in
the
US
is
“a
matter
of
when,
not
if.”

K33’s
Lunde
was
of
a
similar
opinion,
saying
that
a
denial
seems
highly
unlikely
based
on
Grayscale’s
court
win,
and
all
back-and-forth
between
the
SEC
and
issuers
leading
to
updated
S-1s
and
cash
creations.”

Read
more:



Bitcoin
ETF
Looks
Very
Likely
Given
These
Bureaucratic
SEC
Steps

LMAX’s
Kruger
opined
that
Wednesday’s
pullback
is
likely
a
short-term
price
movement
and
expects
a
10%
bitcoin
rally
within
one-two
days
of
the
approval’s
announcement
and
all-time
high
prices
later
this
year.