Within the last 4 days, the Bitcoin price has plummeted over 15%, with a big 7.8% drop occurring in only the past 24 hours. From a high of nearly $72,000 in early June, the value of BTC has now declined by almost 25%. Listed below are the important thing aspects 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 overall Bitcoin supply, is slated for distribution among the many creditors of the exchange, which ceased operations in 2014 because of a significant 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, because the potential for large 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 start 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 significant holder like a government may lead to downward price pressure.
#3 Massive Long Liquidations
The Bitcoin market has experienced a pointy increase within the liquidation of long positions, with a record $212 million value of BTC liquidated just previously 48 hours. This liquidation is essentially the most significant since April 13, when $261 million value of BTC longs were liquidated, resulting in 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, resulting in forced sell-offs and further price declines. These liquidations are indicative of a highly leveraged market where investors is perhaps 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 three.125 BTC, escalating economic pressures on miners. This reward reduction was anticipated to extend Bitcoin’s price, but the rise didn’t materialize, leaving miners with diminishing returns.
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The present 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 big 7.7% drop in hashrate and a plummet in mining revenue per hash to close all-time lows, signifies that many miners were forced to show 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 did not materialize to this point, resulting in subdued activity within the ETF space. As a substitute, the spot ETFs are currently experiencing a summer lull.
The passion 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 identify ETFs, with the rest 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 first driver of the downward pressure 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