Bitcoin Took The Plunge. Here's Why

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🔻Bitcoin Takes The Plunge
🤔Understanding The Situation
🧩️Answer To Thursday Quiz
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📰Bite-Sized News

BITCOIN TAKES THE PLUNGE

Bitcoin just took a dramatic plunge, testing levels below $25,500. What's going on?

On the night of August 18, Bitcoin dipped to a low of $25,166 on the Binance exchange. At the time of writing, it is trading near $26,374.

This leading cryptocurrency's tumble has sent ripples through the entire crypto market, with its capitalization shrinking by 7.5% in just 24 hours.

Furthermore, in the last day, futures positions totalling over $1 billion were liquidated, setting a record since the FTX drop. Most of this liquidation occurred in Bitcoin and Ethereum contracts, with a significant portion on the OKX exchange.

So what happened? Well, one of looking at it could be expressed in a new headline. Something like:

How the Media is Manipulating the Market Again (or A Case Study of Evergrande)

So, These market liquidations occurred amid various factors, one of which includes circulating rumors about China's largest property developer — China Evergrande Group.

According to Bloomberg, reports emerged claiming that the company had filed for bankruptcy protection under Chapter 15 of the US Code.

Evergrande immediately responded to these rumors, categorically denying the bankruptcy filing report.

In a press release, China Evergrande Group highlighted that the filing in the U.S. is part of a plan for the "restructuring of offshore debt".

The group emphasized that the procedure does not imply bankruptcy.

"Since the bonds [Evergrande] are denominated in US dollars and are governed by New York law, the company has applied to the US court in accordance with Chapter 15 of the US Code to recognize the schemes of arrangement under the restructuring of offshore debt in [the jurisdictions of] Hong Kong and the British Virgin Islands," the statement said.

In 2021, Evergrande announced a default on its dollar bonds.

This declaration was preceded by a prolonged period of uncertainty regarding the financial status of the group.

The media's portrayal of Evergrande at that time painted a picture of imminent catastrophe, which likely fueled global investor panic and triggered market sell-offs.

This was a prime example of how media narratives can sometimes exaggerate the scale of a crisis, contributing to market reactions that may be disproportionately severe.

For instance, in December 2021, the price of Bitcoin fell by almost 19%.

This drastic drop wasn't solely due to Evergrande's situation but was significantly exacerbated by the media's portrayal of Evergrande as being on the brink of catastrophe.

It appears that history may be repeating itself as recent liquidations in the cryptocurrency futures market and rumors surrounding Evergrande are creating a similar sense of panic, despite the company's efforts to communicate its plans for debt restructuring.

Among other possible reasons, an article from The Wall Street Journal can be cited, revealing information from SpaceX company documents that have allegedly fallen into the hands of journalists.

In particular, the WSJ claims that, in 2021 and 2022, Elon Musk's company "wrote off" the value of the Bitcoins it owned, totalling $373 million, and "sold" the cryptocurrency. The publication emphasized that Tesla "took a similar approach" to its digital assets.

In 2021, Musk mentioned that SpaceX was holding the leading cryptocurrency on its balance sheet. Around the same time, Tesla announced its investments in Bitcoin.

There is a note in the post indicating that the WSJ may have misinterpreted information from the financial documents. Since the publication has not released the papers, it is impossible to verify this.

So, yes, there are many factors at play, and the situation isn't as drastically bad as it might seem at first glance. Remember, the media can amplify emotions and drive quick reactions, but it doesn't always paint the complete picture. As always, it's crucial to do your own research, diversify your investments, and avoid making decisions based solely on headlines. Have a fantastic weekend, and stay savvy!

TL;DR: Bitcoin recently experienced a sharp drop, falling below $25,500 and causing a 7.5% reduction in its market capitalization within 24 hours. The plunge also led to over $1 billion in futures liquidations, with the situation potentially connected to rumors surrounding China's Evergrande Group's bankruptcy filing, highlighting the impact of media narratives on market reactions.

UNDERSTANDING THE SITUATION

The situation with Evergrande is a textbook example of how it feels when chaos is introduced without anyone's permission.

Imagine, you wake up, and the first thing you see is RED all over your portfolio. To make matters worse, imagine having several portfolios.

Different platforms, multiple wallets, and various addresses. This sounds like stress multiplied by confusion. And, as you can imagine, this simply cannot result in anything positive.

Well, one way of not losing control over a chaotic and rapidly-developing situation is to be prepared for one. And our friends from CoinStats have the solution for a day like that.

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