In the past four days, the price of Bitcoin has fallen by more than 15%, with the largest drop of 7.8% occurring in the last 24 hours. From a high of around $72,000 in early June, the price of BTC has now fallen by around 25%. Here are the main factors that caused the big drop in price yesterday.
#1 Bitcoin Payments for Mt. Gox
The upcoming distribution of 142,000 BTC is the crypto exchange Mt. Gox’s inactivity has fueled market anxiety. This amount, which represents 0.68% of the total supply of Bitcoin, is planned for distribution among the exchange lenders, which ceased operations in 2014 due to a major hacking event.
The distribution process has already seen massive transfers, with 52,633 BTC transferred in recent hours, suggesting that preparations are underway to pay out large amounts. Market observers and analysts are closely monitoring these movements, as the potential for large-scale sales by these creditors can cause significant volatility in the market.
The psychological impact of this spread led to early selling among Bitcoin holders, further fueling market jitters.
#2 The German government
The German government’s decision to begin capping its Bitcoin holdings has sent ripples through the market as well, with transactions recorded on major exchanges such as Bitstamp, Coinbase, and Kraken.
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Over two weeks, the government reduced its holdings from 50,000 BTC to 42,274 BTC. Market participants understandably fear that further sales by a major shareholder such as the government could lead to downward pressure on prices.
#3 Great Long Finish
The Bitcoin market has faced a sharp increase in the liquidation of long positions, with a record worth of $212 million of BTC issued in the last 48 hours. This completion is the most important since April 13, when $261 million long BTC was completed, leading to a steep drop in the price of Bitcoin from $68,500 to $61,600.
Such foreclosures often cause a backlash, leading to forced sales and further price declines. This expiration is an indicator of a highly profitable market where investors may be overextended, contributing to market volatility.
#4 BTC Miner Capitulation
Post the Bitcoin reduction event on April 20, 2024, the mining reward was reduced from 6.25 to 3.125 BTC, increasing economic pressures on miners. This reduction in reward was expected to increase the price of Bitcoin, but the increase did not happen, leaving miners with a diminishing profit.
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The current price among miners is similar to previous market bottoms, such as those seen after the fall of FTX, researchers from CryptoQuant recently revealed. Indicators of miner distress, including a significant 7.7% drop in hashrate and a drop in mining revenue per hash to near all-time lows, meant that many miners were forced to shut down their machines and sell their BTC stash.
#5 Declining US Spot Bitcoin ETF Activity
Contrary to the expectations of a booming market driven by institutional investment with Bitcoin ETFs, there has been a noticeable decline in this sector. The expected “second wave” of institutional money has failed to materialize so far, leading to low activity in the ETF space. Instead, ETFs are currently experiencing a summer lull.
The enthusiasm surrounding Bitcoin ETFs has not been able to withstand a very negative market outlook; however, its direct impact remains relatively small. Leading on-chain analyst James “Checkmate” Check recently estimated that only 20% of real estate volume is attributable to ETFs, with the rest coming from the general market. In recent weeks, long-term BTC holders have been selling their holdings in significant numbers, which has been the main driver of downward pressure on the market.
At press time, BTC traded at $54,434.
The featured image was created with DALL·E, a chart from TradingView.com
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