Whenever there is a sudden and significant drop in the price of Bitcoin, many theories pop up. Usual suspicions include government regulation, the possibility of price manipulation by exchanges, price manipulation by Bitcoin (BTC) whales, overleveraged traders, and some conspiracy involving Tether (USDT).
SEC bans Bitcoin ETF from going ahead
Between Aug. 15 and Aug. 18, the price of Bitcoin fell by a massive 12%. The incident followed a familiar pattern, sparking a variety of reasons analysts and experts have come up with.
Unfortunately, due to the decentralized nature of cryptocurrencies and the lack of transparency between exchanges, verifying whether a particular entity influences price movements remains a challenging task.
On Aug. 11, Ceni Capital co-founder Ceni made a prediction that turned out to be partially accurate. Ceni expects bitcoin prices to fall below $29,000 and expects the U.S. Securities and Exchange Commission (SEC) to delay a decision on the ARK bitcoin exchange-traded fund (ETF).
U.S. Securities and Exchange Commission (SEC) Delays Decision on Ark Invest Spot Bitcoin ETF Application, Calls for Public Comment – Market Manipulation by BlackRock Delayed 8 Weeks. 29k should soon break the cheap stats for holders and institutional investors. pic.twitter.com/pcBhOho0Ax
— CENI⬛️(,) (@ceni0718) August 11, 2023
It is worth noting, however, that the forecast does not specify when this event will occur or the exact support level. As a result, the statistical basis for this assumption has become less certain.
Still, Saini’s point to BlackRock as a potential instigator of the Bitcoin crash deserves a thorough investigation.
Spot Bitcoin ETF Not a Short-Term Deal for BlackRock
The idea that BlackRock could benefit from lower bitcoin prices ahead of the launch of a spot bitcoin ETF is not as simple as it seems. While the concept of increased profitability following the launch of an ETF as a result of lower bitcoin prices may be intuitive, there are several reasons why this may not be in BlackRock’s broader interests.
First and foremost, BlackRock has built a reputation as a respected financial institution based on its commitment to market stability and investor confidence. A sudden and sharp drop in the value of bitcoin could damage the overall credibility of the cryptocurrency market, a situation BlackRock wants to avoid. The priority of maintaining market legitimacy may outweigh any immediate gains from a low bitcoin price.
Second, obtaining regulatory approval plays a crucial role in launching any financial product, especially in the cryptocurrency space. The SEC carefully evaluates the potential for market manipulation and investor protections. Engaging in activities that could be viewed as price manipulation could jeopardize BlackRock’s chances of obtaining the necessary regulatory approval for its ETF offering.
Finally, instilling investor confidence is critical when launching any investment product, especially one as novel as a Bitcoin ETF. A sharp drop in the price of Bitcoin could erode investor trust, not only in the asset class itself, but also in ETFs.
Therefore, BlackRock’s interest may lie in launching the ETF at a time when market sentiment is positive and investors are confident about future earnings potential.
If not BlackRock, who is to blame for the Bitcoin price drop?
The next possibility that is often considered when trying to explain the drop in bitcoin prices is that governments will regulate the cryptocurrency industry. The motivation for regulation will be the desire to reduce demand so that the dollar strengthens.
Typically, these theories suggest that steps will be taken to control stablecoins and exchanges located outside the United States. Market analyst Joe Kerr talked about this on X (formerly Twitter):
Tin foil hat time:
Sell government bitcoins to Coinbase to suppress prices.
Let Binance defend BNB by selling Bitcoin.
Drain Binance’s cheap bitcoins and sell them to coinbase.
Binance is bankrupt and Coinbase owns the majority of Bitcoin transactions (SSA requirement fulfilled).
approve…
— Joe Kerr ⚡ (@Boomstick44) August 18, 2023
While this theory is intriguing, there are some challenges and factors that make it seem unlikely. First, it is possible to track government wallets to some extent, but analysts should keep in mind that governments typically only own a small fraction of all bitcoins, so their influence on the overall market is limited.
Related: 88% of Bitcoin Speculators’ BTC Bags Are Underwater – Study
Shorting the BNB price and other crap
Next, the idea of shorting the price of BNB (BNB) might not be as simple as it sounds. In order to short BNB, traders need to borrow BNB, but they cannot do so on compliant platforms.
Also, by checking Binance’s transparent pagepeople can see in real time whether the exchange’s bitcoin wallet is getting smaller compared to other exchanges.
This could indicate something unusual, such as improper use of client funds or financial problems. Actual data from these observations is more important than guesswork as it can give you insight into how exchanges are performing.
Ultimately, most theories make assumptions and simplify things, ignoring the complexities of cryptocurrency markets, exchanges, and regulation.
Actual results could be very different from what is suggested, so while the public may never be sure of the truth, one can at least refute theories such as BlackRock causing Bitcoin to crash before the spot Bitcoin ETF was approved.
This article is for general informational purposes only and is not intended and should not be construed as legal or investment advice. The views, ideas and opinions expressed here are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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