Over the past four days, the price of Bitcoin has plunged by more than 15%, with a massive 7.8% drop in the past 24 hours alone. From its high of nearly $72,000 in early June, the price of BTC has now fallen by nearly 25%. Here are the key factors behind this massive price drop.
1: Bitcoin repayment from Mt. Gox
The impending distribution of 142,000 BTC by defunct cryptocurrency exchange Mt. Gox has stirred up market anxiety. The amount, which represents 0.68% of the total Bitcoin supply, is expected to be distributed among creditors of the exchange, which ceased operations in 2014 following a major hack.
There have been a large number of transfers during the distribution process, with 52,633 BTC being moved in recent hours, suggesting that preparations are underway for a large payout. Market watchers and analysts are closely watching these movements, as the possibility of a large-scale sell-off by these creditors could bring considerable volatility to the market.
The psychological impact of this distribution presumably led to preemptive selling by Bitcoin holders, further exacerbating market jitters.
2: Germany Germany's decision to start liquidating its Bitcoin holdings has also caused ripples in the market, with major exchanges such as Bitstamp, Coinbase and Kraken recording transactions. In two weeks, the government reduced its Bitcoin holdings from 50,000 BTC to 42,274 BTC. Many people are also concerned that continued selling by major holders like the government could lead to downward price pressure.
3: Massive Long Liquidations The Bitcoin market has experienced a dramatic increase in long position liquidations, with a record $212 million worth of BTC liquidated in the past 48 hours alone. This liquidation is the most significant since April 13, when $261 million worth of BTC longs were liquidated, causing the Bitcoin price to drop sharply from $68,500 to $61,600.
4 BTC miners capitulate
The economic pressure on miners increased after the Bitcoin halving event on April 20, 2024, when the mining reward was halved from 6.25 BTC to 3.125 BTC. This reward reduction was expected to increase the price of Bitcoin, but this increase did not materialize, leaving miners with diminishing returns.
Researchers at CryptoQuant recently revealed that the current miner capitulation is similar to previous market bottoms, such as the bottom seen after the FTX crash. Miner metrics, including a massive 7.7% drop in hash rate and a plunge in per-hash mining revenue to near-record lows, mean that many miners are forced to shut down their equipment and sell BTC.
5: US Spot Bitcoin ETF Activity Slows
Contrary to expectations of market activity driven by institutional investment through spot Bitcoin ETFs, the industry has seen a marked slowdown. The expected “second wave” of institutional funding has so far failed to materialize, leading to sluggish activity in the ETF space. Instead, spot ETFs are currently quiet.
The enthusiasm surrounding a Bitcoin ETF could not offset the overwhelmingly negative market sentiment; however, its direct impact remained relatively small.
Leading on-chain analyst James “Checkmate” Check recently estimated that only 20% of spot volume is attributed to spot ETFs, with the rest coming from traditional spot markets.
In recent weeks, long-term BTC holders have been selling off their holdings en masse, which has been the main driver of downward pressure on the market.
At press time, BTC is trading at $55,159.
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