The recent sharp fall in Bitcoin price to a four-month low has been attributed to the impending distribution by defunct crypto exchange Mt Gox. This has led to growing concerns over an increase in selling pressure on the token. German police moving about $75 million worth of confiscated crypto onto exchanges has also added to the downward trend in Bitcoin price.
The liquidators of Mt Gox announced in June that they will begin returning Bitcoin stolen during a 2014 hack back to clients from early July. Traders are speculating that most receivers of the tokens will choose to sell them, especially considering the exponential rise in Bitcoin’s price over the past decade. This expectation has created massive selling pressure on Bitcoin, with many traders rushing to dump the token and lock in profits.
Broader cryptocurrency prices have followed Bitcoin’s steep decline, with uncertainty surrounding the U.S. presidential election and interest rates also impacting sentiment towards crypto. Speculation that President Joe Biden may not run for reelection in 2024 has added to the uncertainty, especially amid concerns that his potential replacement may have a negative stance towards crypto. Additionally, uncertainty ahead of a key U.S. nonfarm payrolls reading has kept traders cautious towards crypto, despite the weakening dollar and expectations of an interest rate cut.
Cryptocurrency markets have largely lagged behind the rally in stocks, which they typically track. The world’s second-largest token, Ether, has also experienced a significant drop, wiping out all gains made in late May and hitting a near two-month low. Other tokens like XRP, SOL, ADA, SHIB, and DOGE have also seen notable losses, driven in part by low trading volumes due to the U.S. market holiday. However, these losses also reflect a declining sentiment towards crypto, as the excitement over the approval of a spot Bitcoin exchange-traded fund has faded.
The impact of the impending distribution by Mt Gox and fears of additional sales by the German police have intensified selling pressure on Bitcoin, leading to a significant drop in its price. Market uncertainty, coupled with negative sentiment towards crypto, has further contributed to the downward trend in cryptocurrency prices. Traders need to carefully monitor these developments and adapt their strategies accordingly in the volatile crypto market.