Bitcoin crashed to nearly $25,000 yesterday, breaking a wedge pattern it has been trading in since the November 2022 lows — driven by significant liquidations and speculation surrounding SpaceX’s reported bitcoin sale.

The shift was primarily driven by substantial bitcoin and ether liquidations on prominent crypto options exchanges, Deribit and OKX, crypto trading firm QCP Capital said in its latest market update. These exchanges accounted for a staggering 50% of all liquidation flow during this move, QCP said — a figure that stands in stark contrast to an open interest share of just 17%. Open interest represents the total number of active contracts held by all market participants in a particular derivatives market.

Global perps long liquidations. Image: QCP Capital.

Crypto traders on centralized exchanges were liquidated by more than $1 billion amid the market volatility — the largest since the collapse of FTX. DeFi wasn’t spared either, with over $75 million in liquidations — the highest for the year — across the sector, according to Parsec.

BTC aggregated liquidations. Image: Coinalyze/TradingView.

Speculation that the ‘Dogefather had thrown in the towel on crypto’

QCP said the catalyst for the abrupt market movement seems to be a Wall Street Journal article revisiting SpaceX's Bitcoin write-down in 2021 and 2022. The piece hinted that SpaceX, under CEO Elon Musk, might have offloaded its bitcoin holdings, leading to market speculation that Tesla might have done the same and the “Dogefather had thrown in the towel on crypto.”

The speculation “brought back the 2021 and 2022 ghosts of Elon-driven tops and bottoms,” QCP added.

Derivatives market in bearish mode

The aftermath of this break has shifted the derivatives market into a bearish extension mode, QCP continued. Bitcoin's perpetual funding rate is now at its most negative in half a year. Ether faced even more pronounced effects, with Deribit perps trading as low as $1,466.

All eyes are now on the outcome of Grayscale’s lawsuit against the SEC — which could impact decisions about other pending spot bitcoin ETFs — and Fed Chair Jerome Powell's upcoming speech at Jackson Hole next week.

Despite the market's recent turbulence, the key $24,000 to $25,000 zone for bitcoin has held firm, QCP said, predicting an end to the current corrective Wave A, followed by a bounce in Wave B to test the wedge bottom, and finally, a concluding Wave C to round off the quarter — what the firm calls its “supermoon correction window.”

BTCUSD on Coinbase. Image: QCP Capital/TradingView.