Inside the last 4 days, the Bitcoin price has plummeted over 15%, with a giant 7.8% drop occurring in just the past 24 hours. From a high of nearly $72,000 in early June, the worth of BTC has now declined by almost 25%. Listed below are the necessary thing points behind yesterday’s dramatic fall in price.
#1 Mt. Gox’s Bitcoin Repayments
The upcoming distribution of 142,000 BTC by the defunct crypto exchange Mt. Gox has significantly stirred market anxiety. This amount, representing 0.68% of the general Bitcoin supply, is slated for distribution amongst the numerous creditors of the exchange, which ceased operations in 2014 due to a big hacking event.
The distribution process has already seen large transfers, with 52,633 BTC moved in recent hours, suggesting that preparations are underway for a large-scale disbursement. Market observers and analysts are closely monitoring these movements, since the potential for big selling by these creditors could inject considerable volatility into the market.
The psychological impact of this distribution has presumably led to preemptive selling amongst Bitcoin holders, further amplifying market jitters.
Mt. Gox moves its Bitcoin | Source: Arkham
#2 German Government
The German government’s decision to begin liquidating its Bitcoin holdings has sent ripples through the market as well, with transactions recorded on major exchanges akin to Bitstamp, Coinbase, and Kraken.
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Over a fortnight, the federal government reduced its holdings from 50,000 BTC to 42,274 BTC. Market participants are understandably nervous that a continuous sell-off by a big holder like a government may result in downward price pressure.
#3 Massive Long Liquidations
The Bitcoin market has experienced a sharp increase inside the liquidation of long positions, with a record $212 million value of BTC liquidated just previously 48 hours. This liquidation is actually essentially the most significant since April 13, when $261 million value of BTC longs were liquidated, leading to a steep decline in Bitcoin’s price from $68,500 to $61,600.
BTC total liquidations | Source: Coinglass
Such liquidations often trigger a series response, leading to forced sell-offs and further price declines. These liquidations are indicative of a highly leveraged market where investors is maybe overextended, contributing to heightened market volatility.
#4 BTC Miner Capitulation
Post the Bitcoin halving event on April 20, 2024, the mining reward was halved from 6.25 to 3.125 BTC, escalating economic pressures on miners. This reward reduction was anticipated to increase Bitcoin’s price, however the rise didn’t materialize, leaving miners with diminishing returns.
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The current capitulation amongst miners is akin to previous market bottoms, akin to the one seen following the FTX collapse, researchers from CryptoQuant recently revealed. Indicators of miner distress, including a giant 7.7% drop in hashrate and a plummet in mining revenue per hash to shut all-time lows, signifies that many miners were forced to indicate off their equipment and sell the BTC stash.
Bitcoin network hashrate drawdown | Source: X @jjcmoreno
#5 Slowdown In US Spot Bitcoin ETF Activity
Contrary to expectations of a buoyant market driven by institutional investments through spot Bitcoin ETFs, there was a noticeable slowdown on this sector. The anticipated “second wave” of institutional money has didn’t materialize so far, leading to subdued activity inside the ETF space. Instead, the spot ETFs are currently experiencing a summer lull.
The eagerness surrounding Bitcoin ETFs has been unable to counteract the overwhelmingly negative market sentiment; nevertheless, its direct impact stays relatively minor. Leading on-chain analyst James “Checkmate” Check recently estimated that only 20% of the spot volume is attributable to discover ETFs, with the remaining stemming from traditional spot markets. Over recent weeks, long-term BTC holders have been selling off their holdings in significant numbers, which has been the primary driver of the downward pressure available available on the market.
At press time, BTC traded at $54,434.
BTC dropped below $54,000, 1-day chart | Source: BTCUSD on TradingView.com
Featured image created with DALL·E, chart from TradingView.com