Bitcoin Plunges: The Secret Cause Revealed

Bitcoin’s sell-off worsened over the weekend, with the cryptocurrency briefly dipping below $62,000 for the first time in roughly three months.

While macroeconomic pressures, ETF outflows, forced liquidations, and volatility in technology stocks have all played a role, an unusual liquidity drain may be exacerbating the downturn.

In times of such market turmoil, identifying the root causes is paramount. Previous analyses have explored various factors contributing to Bitcoin’s sharp decline from $81,000 to below $62,000 in just ten days, including a specific focus on the Saturday crash.

However, a new perspective has emerged, one that was previously overlooked but offers a compelling explanation, as it has historical precedent. Matt Cole, CEO of Strive, has drawn an intriguing parallel between Bitcoin’s current slump and the period preceding SpaceX’s record-breaking initial public offering (IPO) in June.

SpaceX raised $75 billion when it went public on June 12. In the 50 days leading up to its listing, Bitcoin experienced a nearly 20% drop. Now, the AI giant Anthropic is poised to enter the public markets.

The artificial intelligence firm is reportedly seeking to raise up to $64.4 billion, which would position it as the second-largest IPO on record, trailing only SpaceX. Investor demand has been exceptionally strong, with orders allegedly reaching approximately six times the number of shares available.

Bitcoin’s performance in the lead-up to Anthropic’s listing bears a striking resemblance. Cole calculated that Bitcoin had fallen roughly 18% over the equivalent 50-day period at the time of his assessment. However, the asset’s further decline on Saturday has pushed losses closer to 25%.

“From the IPO-day close to Day +100, Bitcoin gained 28%. From the low, it gained 39%,” Cole noted. “The takeaway is that the selling came in the run-up to the listing. The bottom had effectively happened by the IPO, and the recovery came relatively shortly after, and it came all at once.”

The Kobeissi Letter reported that the total cryptocurrency market capitalization shed $330 billion during the week, with liquidations soaring to $2 billion over the weekend alone. Spot Bitcoin ETFs continued to experience significant outflows for the week, leading some to argue that Bitcoin desperately needs a new catalyst to reverse its fortunes.

Indeed, the market requires a return of liquidity. This could manifest through the Anthropic capital raise eventually absorbing investor funds earmarked for it, a slowdown or reversal in ETF redemptions, a resurgence in spot demand, and a more favorable macroeconomic environment.

The SpaceX precedent offers a potentially bullish outlook: a massive IPO drains liquidity prior to its debut, Bitcoin finds its bottom around the event, and capital subsequently flows back into liquid markets. For the moment, however, the market is awash in losses, and traders should approach any rebound attempts with caution, as they could prove to be mere dead-cat bounces.