Bitcoin and altcoins suffered a big dive, and the crypto market was turbulent again
On July 5, 2024, the cryptocurrency market once again experienced a sharp decline, with the price of Bitcoin falling to about $54,000, and many altcoins even falling below the lows of the 2022 bear market. This market turmoil not only affected Bitcoin, but also had a huge impact on the entire cryptocurrency market.
Bitcoin selling pressure and altcoin panic selling
According to Coingecko data, the global cryptocurrency market capitalization has now fallen below $2.1 trillion, down 7.81% in the past 24 hours. Bitcoin's continued decline has triggered panic selling of altcoins, further exacerbating market volatility.
Macroeconomic uncertainty exacerbates market pressures
The immediate cause of the decline was the huge selling pressure on Bitcoin, while the underlying cause was uncertainty at the macroeconomic level, especially the uncertain prospects for interest rate cuts. This uncertainty led to low market sentiment and investors sold to avoid risks.
Serial leverage liquidation triggers market turmoil
Since yesterday, many whales have had their positions liquidated, with about $700 million liquidated in the crypto market in the past 24 hours. The phenomenon of serial liquidation has spread rapidly, exacerbating the market's decline and constantly breaking investors' psychological bottom line. In fact, the main factors affecting the market have remained unchanged since June, including the following:
Mt.Gox Repays Bitcoin
The Mt.Gox incident more than a decade ago finally broke out this year. On May 28 this year, Mt.Gox, an exchange that had been bankrupt for ten years, began to transfer out 141,685 bitcoins from its cold wallets, which were worth about $98 billion at the time. This incident triggered a panic sell-off in the market. These bitcoins will be released to creditors between July and October.
On July 5, Mt.Gox began to pay creditors. Japanese creditor @VoiceOnFate posted on the X platform that he had received compensation in Bitcoin and Bitcoin Cash from Mt.Gox through a designated exchange platform, and the amount of compensation was 13% of the number of positions held in his account that year. Mt.Gox lost about 750,000 user Bitcoins at the time, and the 141,686 Bitcoins it currently holds account for 0.72% of the total supply of Bitcoin in circulation. If all these coins are paid to creditors and sold, it may have a significant impact on the price of Bitcoin. Some analysts pointed out that the price of Bitcoin may fall to around $47,000.
The Bitcoin market continues to fluctuate, and multiple factors have led to the decline
On July 5, 2024, the cryptocurrency market experienced another sharp drop, with the price of Bitcoin falling to about $54,000, and altcoins also suffered heavy losses. This market turmoil not only affected Bitcoin, but also had a huge impact on the entire cryptocurrency market.
Bitcoin selling pressure and altcoin panic selling
According to Coingecko data, the global cryptocurrency market capitalization has now fallen below $2.1 trillion, down 7.81% in the past 24 hours. Bitcoin's continued decline has triggered panic selling of altcoins, further exacerbating market volatility.
Macroeconomic uncertainty exacerbates market pressures
The immediate cause of the decline was the huge selling pressure on Bitcoin, while the underlying cause was uncertainty at the macroeconomic level, especially the uncertain prospects for interest rate cuts. This uncertainty led to low market sentiment and investors sold to avoid risks.
Massive government sales of Bitcoin
Bitcoin sell-offs by Germany, the U.S. government, and others
The German government holds 45,624 bitcoins and has transferred more than $425 million worth of bitcoins to exchanges in less than a week since June 25, 2024.
In addition to the German government, governments such as the United States, the United Kingdom, China, and Ukraine also hold a large amount of Bitcoin. On-chain data shows that the US government sent 3,940 Bitcoins to the Coinbase Prime wallet on June 26, 2024. These large-scale government sales have undoubtedly exacerbated the selling pressure in the market.
Miners sell off
After the halving, miners' income dropped sharply, forcing many inefficient miners to exit the market, and Bitcoin computing power dropped significantly. OKLink data shows that the total Bitcoin computing power has dropped by 15% from its peak in the past two months, and has continued to decline in the past week.
At the same time, the miner group has also increased its selling efforts recently, becoming one of the biggest selling pressures in the market. Miners are more focused on short-term interests. According to IntoTheBlock data, Bitcoin miners have sold more than 50,000 Bitcoins since 2024, and the Bitcoin reserves held by miners have gradually dropped to the lowest level in history.
Institutional buying inflows slowed
One of the core factors of the current rise in Bitcoin is the Bitcoin spot ETF. Matrixport once published that institutional investors such as asset management companies, investment advisors, pension funds and sovereign wealth funds purchased Bitcoin spot ETFs, which led to a surge in demand for Bitcoin and a surge in prices. However, this consensus has been challenged recently. Since June, funds in Bitcoin spot ETFs have been in a state of large outflows most of the time, and market liquidity is insufficient.
Weakened macroeconomic expectations and market outlook analysis
Fed policy and market expectations
At the monetary policy meeting on June 12, 2024, the Federal Reserve decided to maintain the target range of the federal funds rate at 5.25% to 5.5%. According to the published dot plot of the interest rate hike path, Federal Reserve officials predict that the median federal funds rate will drop to 5.1% by the end of 2024, which means that there may be only one rate cut this year, which is less than the previous forecast of two.
So, will there be another interest rate cut this year? At present, a rate cut is more likely. The Fed's monetary policy stance has a significant impact on market expectations and investor confidence, and market expectations for interest rate cuts are constantly adjusting.
Digesting selling pressure and future market trends
To push the market upward, the Fed's interest rate cut is undoubtedly a key factor. At this stage, the market's gains are mainly driven by information, and the entry of macro liquidity will directly improve market sentiment. In addition, the approaching US election will also have a positive impact on the crypto market.
The crypto war between Trump and Biden is intensifying, and the crypto industry has become an important bargaining chip for politicians to win over voters. Trump chose crypto figures as his election assistants and publicly supported the Bitcoin Miners Conference. Biden participated in the Bitcoin Roundtable and contacted crypto-related people. The game between the two sides is undoubtedly good for the crypto industry. The positive effect of this game can be seen from the sudden approval of the Ethereum spot ETF.
Current Market Conditions and Investment Sentiment
In the short term, the market has bottomed out. The price of Bitcoin has fallen to the shutdown price of some mining machines, which usually indicates the arrival of a staged bottom. OKX data shows that the current over-the-counter price of USDT has risen to 7.38 yuan, while the exchange rate of the US dollar against the offshore RMB is 7.29 yuan, indicating that there is a strong bottom-fishing sentiment in the market.
Despite this, there is still great uncertainty in the short-term market. It will take time for the selling pressure to be digested, and the compensation for Mt. Gox has just begun. According to the trustee documents, Mt. Gox creditors may have to wait up to three months to receive Bitcoin or Bitcoin Cash repayments, and this process will continue to have an impact on the market.
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