Why is there a sell-off in $BTC? This is the result of multiple factors, including the Mt. Gox incident, ETFs, halving, and Germany, among others. I have prepared a comprehensive analysis of the current situation.
In the past week, Bitcoin dropped from $71,000 to $57,000, marking a 20% decline unseen for quite some time. Today, we delve into why this has occurred and what lies ahead for BTC.
Mt. Gox
The cryptocurrency exchange collapsed in 2014 due to a hacking incident. Last month, there were reports that Mt. Gox was set to begin reimbursing its creditors. Representatives plan to distribute 142,000 BTC (0.68% of total Bitcoin supply) to clients. Many fear creditors might sell these received Bitcoins, which could significantly impact the market. Just the concern over this possibility has led many to start selling their assets.
But that’s not all.
BTC ETF
Spot Bitcoin ETFs make cryptocurrency prices more dependent on institutional investor sentiment. Currently, BTC ETFs hold 5% of the total Bitcoin supply. Early this month, there were outflows from ETFs again, adding pressure to cryptocurrency prices.
Miners’ Challenges
On April 20, 2024, Bitcoin experienced its halving event, reducing miners’ rewards from 6.25 BTC per block to 3.125 BTC. A rise in Bitcoin prices is necessary to keep miners mining, an expectation many hold. However, the price has not risen as anticipated, forcing many miners to sell their BTC.
US Interest Rates
Lower rates make high-risk investments like cryptocurrencies more attractive. Minutes from the Federal Reserve show policymakers are reluctant to lower rates unless further data shows inflation moving towards the 2% target rate.
Germany
The German government holds a significant amount of Bitcoin and has begun liquidating its assets. According to Arkham’s data, Germany recently transferred 400 BTC to exchanges like Bitstamp, Coinbase, and Kraken. In the past two weeks alone, a total of 2,700 BTC has moved from government wallets to exchanges.
All these factors together have led to the current market conditions we observe. However, there are also factors supporting a rise in Bitcoin, which we will discuss in detail.
Major Investors Not Selling BTC
Despite the drop in Bitcoin prices, companies have not been liquidating their assets. Instead, many are beginning to buy BTC during the price decline. While capital release is needed, major miner Marathon Digital Holdings has not disposed of its assets. It is worth noting that miner capitulation may signal a trend reversal. Historical data indicates Bitcoin typically starts rising approximately four months after a halving event. If history repeats, bulls may drive out bears before the end of summer.
Community
According to Santiment’s data, more and more people on social media are advocating “buying the dip.” Bitcoin is seen as particularly attractive when priced below $60,000. The graph below shows statistics of calls to buy Bitcoin across various social networks.
Expectations of Fed Rate Cuts
While most market participants believe the Fed will not cut rates at the end of July’s next meeting, representatives suggest investors may see rate cuts later this year.
US Elections
The US cryptocurrency community is growing rapidly, and presidential candidates are not ignoring this topic. Following recent debates, there is belief that Donald Trump, who openly supports cryptocurrency market development commitments, could become president. If elected, the SEC’s chairperson could be favorable towards cryptocurrencies.
Conclusion
I have analyzed both positive and negative factors affecting the current market. I do not wish to impose any viewpoints on you; you should conduct your analysis and formulate your strategies. Personally, I consider Bitcoin a very good long-term investment (at least 4 years). I am optimistic about the future of cryptocurrencies and believe the market conditions are favorable.
