Bitcoin experienced a significant drop on Thursday, plummeting to nearly $60,000, marking a nearly 30% decline over just seven days. This dramatic selloff has sparked a wave of conjecture among traders on social media platform X, suggesting that the reasons behind the downturn may not solely be macroeconomic or risk-off sentiment but could involve additional factors contributing to Bitcoin’s worst single-day performance since the FTX collapse in 2022.
Notably, a prominent crypto trader known as Flood described the selling pressure as the most aggressive he has witnessed in years. He characterized the selloff as feeling “forced” and “indiscriminate,” offering several theories for the sudden plunge. Among the speculations were potential sovereign entities dumping more than $10 billion worth of Bitcoin, with possibilities including governments from Saudi Arabia, the UAE, Russia, or China engaging in the market. Another theory posited that a major cryptocurrency exchange, possibly facing financial difficulties, was compelled to sell off a substantial amount of Bitcoin held on its balance sheet.
Franklin Bi, a general partner at Pantera Capital, elaborated on these theories, proposing that the seller could be a large player based in Asia with limited connections to crypto-native counterparties. Bi believes this lack of network may have prevented others from quickly identifying the selling entity. He suggested that poorly managed leverage on exchanges, particularly Binance, exacerbated a liquidity crisis highlighted by the unwinding of carry trades. This compounded with an unsuccessful bid to recover through gold and silver trades likely resulted in the desperate market conditions observed.
Aside from leverage concerns, an emerging narrative ties the recent price decline to broader security implications for Bitcoin. Charles Edwards of Capriole indicated that the market downturn might finally draw attention to cyber threats related to quantum computing. Edwards reiterated his belief from the previous year that Bitcoin’s price needed to decline further to spur adequate measures addressing its quantum security risks. He viewed recent discussions in the community about establishing a dedicated security team as a “promising progress,” albeit with some skepticism regarding the sincerity of those initiatives.
Parker White, COO and CIO of DeFi Development Corp., speculated that unusual activity connected to BlackRock’s spot bitcoin ETF may have played a significant role in this sharp decline. He pointed out that the ETF posted its largest trading volume day, reaching $10.7 billion, combined with a record $900 million in options premiums. This spike in trading activity suggested a possible options-driven liquidation was unfolding, contrasting sharply with the typical behavior seen in cryptocurrency markets.
With Bitcoin’s steep decline characterized more by abrupt drops rather than gradual declines, traders are increasingly wary. The market has begun to resemble the chaotic conditions seen post-FTX collapse, leading to thin liquidity across major trading venues and a substantial downward pressure on altcoins. As overall sentiment deteriorates, each price rebound is scrutinized, with traders remaining cautious until there is a clear reset of flow dynamics and positioning in the market.
