The cryptocurrency market experienced a substantial downturn on Friday, compounding the selling pressure witnessed over the past two weeks. The leading cryptocurrency, Bitcoin (BTC), retraced over 20% from its highs in June and May, dropping as low as $53,500.
The market decline was largely attributed to the long-awaited trustee overseeing the Mt. Gox bankruptcy, who announced the commencement of Bitcoin and Bitcoin Cash repayments to creditors affected by the infamous hack that resulted in billions in losses.
As a result, the entire cryptocurrency market shed over $170 billion in combined market capitalization in just 24 hours.
Bitcoin Repayments And German Government Sell-Off
The trustee responsible for the Mt. Gox bankruptcy estate, Nobuaki Kobayashi, that Bitcoin and Bitcoin Cash repayments had begun through designated crypto exchanges.
While the amount transferred to these exchanges was not specified, from market intelligence platform Arkham revealed that 47,229 BTC, valued at $2.71 billion, had been transferred to an unknown address.
Kobayashi emphasized that the remaining funds would be returned to creditors once “specific conditions” were met, including verifying registered accounts and finalizing discussions with the designated exchanges.
The decline in crypto prices led to substantial liquidations in the derivatives markets, with over 229,755 traders experiencing combined liquidations worth $639.58 million in the past 24 hours. Of this amount, $540.46 million represented long trades, indicating positions taken by investors expecting long-term asset appreciation.
Additionally, the German government contributed to the market pressure by selling approximately 3,000 BTC, equivalent to around $175 million, from a seized stash of 50,000 BTC associated with the movie piracy operation Movie2k. Despite the sell-off, the government still holds over 40,000 BTC, valued at over $2 billion.
What Historical Price Cycles Suggest
Despite the ongoing bloodbath witnessed in crypto prices over the past month, industry insiders and analysts remain optimistic about Bitcoin’s future performance.
Despite the short-term selling pressure resulting from Mt. Gox repayments, experts anticipate a rebound towards the end of the year. Crypto data and research firm CCData that Bitcoin’s current appreciation cycle has not yet peaked and will likely achieve a new all-time high.
Historical market cycles indicate that Bitcoin’s Halving event, which reduces the supply of new BTC, typically precedes a period of price expansion between 12 and 18 months. The most recent Halving occurred in April, suggesting potential further growth into 2025.
Tom Lee, co-founder and head of research at Fundstrat Global Advisors, told CNBC that he predicts that Bitcoin will hit $150,000 despite the Mt. Gox overhang.
The launch of an Ethereum exchange-traded fund (ETF) in the US and the approval of the first US spot Bitcoin ETF earlier this year contribute to the overall positive sentiment in the market, indicating potential growth and further mainstream adoption of cryptocurrencies.
At the time of writing, BTC is trading at $55,680, reflecting a significant 21% drop in price over the past month. Bulls in the market are closely monitoring the $54,480 price level, representing substantial support for BTC. This level holds critical importance as it could prevent further price declines and the risk of breaking below the crucial $50,000 level.
Featured image from DALL-E, chart from TradingView.com
