Why Is Bitcoin Crashing? (August 2024)

Bitcoin is a high-risk investment, and as such, it suffers frequent price swings. Because Bitcoin isn’t backed by any government entities, there are many events that can cause it to crash suddenly, often scaring off potential and long-term investors. But the big question is, what is causing it to crash right now?

The first week of August has been tough for the cryptocurrency Bitcoin. If you are worried about its current state, keep reading, as we will discuss all the possible reasons it crashed today.

Why is Bitcoin Crashing Right Now?

There is no one reason that Bitcoin is experiencing a price dip, but rather several reasons. We will cover them all one by one below.

1. The German Government is Selling Off Bitcoin

The German government recently seized millions of dollars worth of Bitcoin from a ring of movie pirates, and after a vote, the government decided it didn’t want to keep this Bitcoin. As a result, at the end of June 2024, the German government began to slowly sell off its almost 60,000 Bitcoins, and as such, the market has taken a big hit.

This happens because of the law of supply and demand. This sell-off increased supply massively and suddenly, while demand stayed the same, causing the prices to plummet.

Related: The German Government Using Bitcoin: What You Need to Know

2. The Stock Market is in a Recession

While Bitcoin doesn’t mirror the stock market in turns of rising and falling, when things are bad in economies everywhere, people tend to hold on to their money and put it in savings rather than investing.

As layoffs rise around the globe and many companies cease hiring, we expect that fewer people are considering buying Bitcoin. In fact, some people may be selling their holdings to make ends meet, causing the prices to lower dramatically.

Beyond just the basic fact that many people are feeling their economic situation tighten, many countries are suffering from massive inflation—mainly the US and Japan, and, as such, are making moves like raising interest rates to try and protect their currencies. Unfortunately, when interest rates rise, people tend to spend less as well, especially on risky investments like Bitcoin.

Related: Is an Economic Recession Coming in 2024?

3. Bitcoin ETFs Still Haven’t Officially Launched

Although Bitcoin ETFs were approved by US regulators in January 2024, there were many hoops that investment firms and banks had to jump through before they could offer them to clients. As such, while they currently exist, they are only in a sort of testing phase, but that’ll all change soon.

When Bitcoin ETFs were first approved, many people bought Bitcoin because of the hype and the expected increased interest in the cryptocurrency. Because it has taken so long to bring them to actual fruition, some individuals have lost interest or pulled their money away for other purposes.

However, Morgan Stanley recently announced that it will be offering Bitcoin ETFs to clients very soon, meaning the hype could help save Bitcoin prices from the current free-fall, though no date of the official offering has been announced yet.

Related: The Best Bitcoin ETFs to Invest in

4. Global Tensions are on the Rise

Apparently, World Peace is just not meant to be, as tensions rise in both the Middle East and South America. On top of the continuing conflict in both Ukraine and Palestine, Iran has threatened to join forces against Israel, throwing those in the Middle East into a state of fear over a coming war.

If that weren’t enough, the dictator regime in Venezuela is growing stronger, causing neighboring democratic countries to fear the future. Additionally, information about Venezuelan torture centers and social media monitoring of all citizens has risen, leading many to wonder if a war is the next step.

People are afraid of war and how their life will change during one. Thus, many have begun to hold off on investing, keeping more cash on hand in case they need to flee. Additionally, many buyers in countries like Venezuela may have found that they are suddenly unable to receive Bitcoin like they were previously due to government interference, causing sales for this use to drop off globally.

While we hope there won’t be any more wars than those already going on, we understand the fear causing individuals to slow their purchase of Bitcoin in the interim.

5. Ether Sell Off

A market maker by the name of Jump Trading was rumored to be liquidating all of their assets. Whether or not this is true, a wallet supposedly owned by the company did sell off 17,000 ETH earlier this week, causing prices to plummet and investors of Ethereum to panic.

While the price of Bitcoin isn’t directly tied to the price of ETH, it is tied to the public’s feelings about cryptocurrency as a whole, and since Ethereum is a large well-known cryptocurrency we think that the large sellout might have scared some Bitcoin investors too.

Should You Sell Your Bitcoin?

It can be scary to read all these reasons that Bitcoin is dropping in price, but we don’t advise selling right now unless you need to do so to pay bills. While it is possible that Bitcoin prices could continue to decline, we suspect this is just a massive market correction caused by supply and demand. As such, Bitcoin should eventually bounce back and begin climbing once again.

That being said, we don’t have a crystal ball, so we don’t know any of this for certain; it is just our estimation based on past events. Remember, part of investing is the psychology of it and not selling when the going gets tough. We hope that when Bitcoin ETFs open for business and the massive sell-offs stop, Bitcoin will bounce back, but we cannot guarantee it.

Overall, there are several major reasons why Bitcoin is dipping right now, but we do think it will eventually bounce back, so keep HODLing, especially if you don’t need the money for other purposes.