Whats Behind Todays Crypto Decline Bitcoin Falls Below 55000 with Mt Gox Commencing Repayments
Bitcoin’s price has plunged below the $55,000 mark, hitting its lowest level in four months, signaling a notable market downturn. The leading cryptocurrency saw a significant pullback today, exacerbating concerns among investors. This decline comes amidst various contributing factors.
A pivotal development is the commencement of fund distribution by Mt. Gox, the infamous cryptocurrency exchange that collapsed in 2014. After a decade of legal battles, Mt. Gox initiated repayments to its creditors, transferring approximately $9 billion worth of Bitcoin and Bitcoin Cash. The movement of 47,228 BTC, valued at around $2.71 billion, from cold storage to active wallets has injected substantial uncertainty into the market. There’s apprehension that these creditors might flood the market with Bitcoin, thereby driving prices down further.
Beyond Mt. Gox, other factors are influencing the current downturn:
1. **Bitcoin ETF Outflows**: Investors have been withdrawing from Bitcoin exchange-traded funds, reducing demand for the cryptocurrency.
2. **Miner Selling Pressure**: Following the Bitcoin halving earlier this year, miners are facing reduced rewards, prompting some to sell their holdings to cover operational expenses.
3. **High Interest Rates**: The U.S. Federal Reserve’s decision to maintain high interest rates has made risky assets like cryptocurrencies less appealing to investors.
4. **Government Actions**: The German government’s sale of its Bitcoin holdings has added to the market’s supply.
These combined factors have driven Bitcoin’s price down from $63,000 to $57,000 over the past week, with a sharp drop to $53,680.23 in a single day—a stark contrast to its mid-March all-time high of $73,803.25, reflecting a decline of more than 21%.
The broader cryptocurrency market has also felt the impact, with Ethereum, the second-largest cryptocurrency, plummeting 8% to $2,891, its lowest level in a month and a half. The total market capitalization of cryptocurrencies has shrunk to $1.99 trillion, marking an 8% decrease in just 24 hours.
This market sell-off has triggered substantial liquidations across crypto derivatives. Coinglass data indicates that liquidations soared to $678 million within a day. Bitcoin alone saw liquidations exceeding $230 million, while Ethereum witnessed over $167 million. Long traders bore the brunt, with approximately $590 million in liquidated positions.
Moreover, large investors, or “whales,” have been significantly impacted. Analysis by PeckShield reveals instances of whales being liquidated from their lending positions. For instance, one whale using the Compound protocol faced liquidation of 173,000 Ethereum, valued at about $10 million. Similar scenarios unfolded with Bitcoin whales who had leveraged their holdings as collateral for loans.
On-chain data underscores the selling spree among Bitcoin whales, who have offloaded more than 30,000 BTC, amounting to over $1.8 billion, over the past month. This mass sell-off from major holders has undoubtedly intensified the broader market downturn.
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