What is the reason for todays crypto decline Bitcoin drops below 60000 amidst concerns about Mt Gox and market cycle peak
Bitcoin, the world’s largest cryptocurrency, has seen a significant drop in price, falling below $60,000 for the first time since May. This decline has raised concerns about whether the current market cycle has reached its peak.
As of the latest reports, Bitcoin’s price stands at around $59,000, which is about 16% below its all-time high of $73,835 reached on March 14. Over the past 30 days, Bitcoin has fallen by 9.2%, with June showing a particularly steep decline of 11%.
Several factors are contributing to this downward trend. One major concern is the anticipated sale of Bitcoin by creditors of Mt. Gox, a defunct cryptocurrency exchange. Mt. Gox’s liquidators have announced they will begin returning Bitcoin stolen during a 2014 hack to clients starting in early July. This could potentially flood the market with a large amount of Bitcoin, creating significant selling pressure.
Charles Edwards, founder of Capriole Investments, has pointed out several on-chain metrics that suggest Bitcoin may be struggling to achieve new highs. One key metric is the Bitcoin long-term holder (LTH) inflation rate, which has been rising steadily over the past two years. Currently, this rate stands at 1.9, just below the 2.0 threshold that typically signals a high likelihood of a market cycle top. Another important indicator, the Bitcoin Dormancy Flow, has also been increasing over the past three months. This metric measures the number of coins being spent relative to the overall trend. Historically, peaks in this metric have preceded cycle tops by about three months.
Adding to the selling pressure, there are reports of the German government selling hundreds of millions of dollars worth of Bitcoin. This, combined with the Mt. Gox situation, has made many traders cautious.
The recent downturn isn’t limited to Bitcoin. Other cryptocurrencies, including Ether, Binance Coin, and Solana, have also experienced significant price drops. This broader decline in the crypto market suggests a general shift in sentiment among investors.
Despite these recent losses, it’s important to note that Bitcoin’s price is still up 42% year-to-date. Much of this gain came earlier in the year, driven by excitement over the approval of spot Bitcoin exchange-traded funds (ETFs) in January. These ETFs were seen as a crucial step for Bitcoin entering the mainstream market, allowing investors to gain exposure to Bitcoin through traditional investment vehicles.
However, the current market mood seems to have shifted. As Bernstein analysts Gautam Chhugani and Mahika Sapra noted, “After months of Bitcoin ETF euphoria, the market suddenly feels bearish.” This change in sentiment is reflected in recent trading activity, with Bitcoin withdrawals at crypto exchanges outnumbering deposits by $522 million over a recent five-day period.
Looking ahead, the market will be closely watching several factors. The potential impact of the Mt. Gox Bitcoin distribution remains a significant concern. Broader economic indicators, such as upcoming U.S. labor market data, could influence investor sentiment towards risk assets like cryptocurrencies.
