Why did Bitcoin suddenly drop? The reasons!

The crypto market is experiencing an unexpected phase of turbulence, marked by a sharp drop in the price of Bitcoin (BTC). Within 24 hours, the value of the leading cryptocurrency plunged by 2.95%, now trading at $67,230. This decline follows a period of stability and raises many questions about the underlying forces influencing this trend. What recent events triggered this drop, and what could be the implications for investors and the market as a whole?

A large-scale hack shakes the market

The price of Bitcoin had begun to stabilize following the release of the personal consumption expenditures (PCE) index by the U.S. Federal Reserve, which rose by 0.2% in April, in line with analysts’ expectations. However, this stability was abruptly interrupted by the announcement of a hack at the Japanese crypto platform DMM Bitcoin. More than $305 million were stolen.

Hacks of such magnitude often create widespread panic among investors, thus adding extra selling pressure on crypto prices. The memories of the Mt.Gox and Coincheck hacks, which resulted in massive losses and prolonged market disruptions, are still fresh in the collective memory of investors.

Options Expiration and Increased Volatility

In addition to the effects of the DMM Bitcoin hack, the drop in Bitcoin’s price is also attributable to the expiration of more than $8 billion worth of options on Bitcoin and Ethereum. These options included 69,000 Bitcoin contracts valued at $4.7 billion and 920,000 Ethereum contracts worth $3.5 billion. This massive expiration has introduced a higher-than-usual level of leverage in the market, leading to increased volatility.

Indeed, options expiration is a recurring event that can cause major fluctuations in the crypto market. When these options expire, holders have to adjust their positions, which can cause waves of selling or buying. In this case, the confluence of the expiration of Bitcoin and Ethereum options has created additional selling pressure, accentuating the price drop.

Although the crypto market is currently marked by increased volatility and impulsive reactions from investors, the long-term prospects for Bitcoin remain strong.