The sudden plunge has left investors and analysts confused, however, it coincides with a dramatic shift in market sentiment. The Crypto Fear and Greed Index plummeted from 60 to 49 in just 13 days, almost retreating from the edge of "greed" to the "neutral" zone.
The sharp fluctuations in Bitcoin prices and the shift in market sentiment have sparked an exploration of the reasons behind the changes. Several key events in the crypto space appear to be the driving forces behind the market trends.
First, the news of the German government selling Bitcoin shook the crypto market. It is reported that the German Federal Criminal Police Office seized about 50,000 Bitcoins from a pirated website as early as 2013, and its current value has exceeded 3 billion US dollars. Recently, there have been reports that German authorities have begun to transfer these Bitcoins to exchanges and sold about 3,000 Bitcoins within a few days. The remaining 47,000 Bitcoins are still pending. Once this news was exposed, it may have pushed Bitcoin from $66,000 to $63,000. Faced with such a large amount of Bitcoin that may flow into the market, investors' concerns are not difficult to understand.
Secondly, the recent trading behavior of large investors, the "whales" in the market, has also attracted much attention. The data shows that the number of large transactions (over $100,000) dropped by 42% in just a few days, which is a significant change. Why is the trading behavior of "whales" so critical? Because when these big players slow down their trading pace, it is often seen as a signal of market caution. This behavior is particularly noteworthy in the current environment because it occurs on the heels of a massive sell-off, which could mean these large investors are waiting to see if prices fall further, or delaying more selling to avoid a market crash.
Furthermore, the repayment incident of Mt. Gox has once again stirred up the crypto market. The exchange, which closed in 2014, recently announced that it would begin to repay customers for assets lost before its collapse. Nobuaki Kobayashi, the repayment trustee of Mt. Gox, has announced that repayments for Bitcoin and Bitcoin Cash will start in early July. Considering that the total amount of Bitcoin held by Mt. Gox is as high as 141,686, worth about $8.71 billion, this news has undoubtedly caused market concerns. Many investors are worried that as creditors finally get their long-lost Bitcoins, they may rush to cash out, causing a large amount of Bitcoin to flood the market and further depress prices. This concern is not unfounded. The price of Bitcoin quickly fell to $61,060 after the news was announced, a drop of 6.5% in 24 hours.
Finally, it is worth mentioning the liquidation mechanism of the derivatives market. This internal market mechanism played a key role in amplifying the market decline. As the price of Bitcoin began to decline, the derivatives market also triggered a chain reaction. According to Coinglass data, $302 million worth of cryptocurrency positions were forced to close within 24 hours. Among them, the vast majority were long positions, which means that these liquidations mainly hit traders who bet on the rise in cryptocurrency prices. This "domino effect" undoubtedly exacerbated the panic in the market.
In summary, the recent plunge in the crypto market is not caused by a single factor, but the result of multiple factors. From the German government's sale of Bitcoin to the repayment of Mt. Gox, to the "whale" behavior in the market and the liquidation mechanism of the derivatives market, these factors have jointly driven the sharp fluctuations in the market. However, despite the short-term market pressure, in the long run, the crypto market still has huge potential and room for development.
