Bitcoin Price Crashes Below $54,000: Top-5 Reasons
05 July 2024 - 6:00PM
NEWSBTC
In the last four days, the Bitcoin price has plummeted over 15%,
with a significant 7.8% drop occurring in just the past 24 hours.
From a high of nearly $72,000 in early June, the price of BTC has
now declined by almost 25%. Here are the key factors behind
yesterday’s dramatic fall in price. #1 Mt. Gox’s Bitcoin Repayments
The impending distribution of 142,000 BTC by the defunct crypto
exchange Mt. Gox has significantly stirred market anxiety. This
amount, representing 0.68% of the total Bitcoin supply, is slated
for distribution among the creditors of the exchange, which ceased
operations in 2014 due to a major 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, as the potential for massive selling by
these creditors could inject considerable volatility into the
market. The psychological impact of this distribution has
presumably led to preemptive selling among Bitcoin holders, further
amplifying market jitters. #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 such as Bitstamp, Coinbase, and Kraken. Related
Reading: Bitcoin Price Could Massively Crash Like In May 2021,
Warns Fund Manager Over a fortnight, the government reduced its
holdings from 50,000 BTC to 42,274 BTC. Market participants are
understandably nervous that a continuous sell-off by a major holder
like a government could lead to downward price pressure. #3 Massive
Long Liquidations The Bitcoin market has experienced a sharp
increase in the liquidation of long positions, with a record $212
million worth of BTC liquidated just in the past 48 hours. This
liquidation is the most significant since April 13, when $261
million worth of BTC longs were liquidated, leading to a steep
decline in Bitcoin’s price from $68,500 to $61,600. Such
liquidations often trigger a chain reaction, leading to forced
sell-offs and further price declines. These liquidations are
indicative of a highly leveraged market where investors might be
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, but the increase did not
materialize, leaving miners with diminishing returns. Related
Reading: Glassnode: Bitcoin $110,000 Target Holds, Breaking These
Key Levels Crucial To Avoid Crash The current capitulation among
miners is akin to previous market bottoms, such as the one seen
following the FTX collapse, researchers from CryptoQuant recently
revealed. Indicators of miner distress, including a significant
7.7% drop in hashrate and a plummet in mining revenue per hash to
near all-time lows, means that many miners were forced to turn off
their equipment and sell the BTC stash. #5 Slowdown In US Spot
Bitcoin ETF Activity Contrary to expectations of a buoyant market
driven by institutional investments through spot Bitcoin ETFs,
there has been a noticeable slowdown in this sector. The
anticipated “second wave” of institutional money has failed to
materialize thus far, leading to subdued activity in the ETF space.
Instead, the spot ETFs are currently experiencing a summer lull.
The enthusiasm surrounding Bitcoin ETFs has been unable to
counteract the overwhelmingly negative market sentiment; however,
its direct impact remains relatively minor. Leading on-chain
analyst James “Checkmate” Check recently estimated that only 20% of
the spot volume is attributable to spot ETFs, with the remainder
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 on the market. At press time, BTC traded at
$54,434. Featured image created with DALL·E, chart from
TradingView.com
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