Multiple factors, including the huge compensation in Mentougou and the German government's reduction of BTC holdings, have caused the crypto market to fall all the way.

At noon today, BTC briefly fell below $54,000 (currently $54,300), and the lowest price was around $53,200, hitting a new low since February 26 this year, with the largest 24-hour drop exceeding 10%. Bitcoin also fell by about 10% in two days.

The entire altcoin market is also a major disaster. ETH fell to a minimum of $2,806, a 24-hour drop of more than 8%; SOL fell to a minimum of $120.65, a 24-hour drop of more than 5%.

PEPE and TON, which have been relatively strong during this period, also experienced a sharp decline. The 24-hour declines of PEPE and TON exceeded 15% and 7% respectively.

The bulls' psychological defenses were challenged again. Coinglass data showed that the total liquidation of the entire network exceeded $660 million in 24 hours, mainly long orders, with a liquidation amount of $565 million, of which BTC liquidation exceeded $212 million and ETH liquidation exceeded $167 million. The total Bitcoin contract holdings of the entire network continued to decline, with a drop of more than 10% in the past 24 hours.

The continued decline has caused the cryptocurrency panic and greed index to hit a record low. According to Alternative data, today's cryptocurrency panic and greed index is 29 (yesterday's was 44).

5 factors behind the big drop

Josh Gilbert, a market analyst at crypto financial platform eToro, said in a public interview that much of the sell-off can be attributed to concerns about repayments to Mt. Gox creditors.

Mt. Gox plans to distribute 140,000 BTC compensation to the exchange's creditors, accounting for 0.68% of the total Bitcoin supply. Today, this huge compensation has begun to be repaid.

According to Arkham data, Mt. Gox has transferred more than 50,000 BTC in the past few hours. Currently, several MT.GOX creditors in Japan have told the media that they have received BTC/BCH repaid by MT.GOX, and the funds have entered the exchange accounts of Bitbank or Kraken. These creditors are likely to sell on a large scale.

In addition to the panic caused by Mt. Gox, Willy Chuang, chief operating officer of crypto trading platform WOO X, said that multiple factors such as the German government's sale of Bitcoin have exacerbated such concerns.

Germany is one of the countries with the largest BTC holdings in the world. At the beginning of this year, the German police seized 50,000 bitcoins and sold them in early June. According to Arkham monitoring, within two weeks, the German government's bitcoin holdings dropped from 50,000 to about 40,000. In addition to Germany, the US government wallet address has also changed recently, transferring 237 BTC (about 13.67 million US dollars) yesterday. The potential sell-off of the US government is also affecting market sentiment.

In addition, some crypto analysts said that the intensification of large-scale long liquidations, potential selling by BTC miners, and outflows from U.S. spot Bitcoin ETFs are also factors that cannot be ignored behind the sharp drop.

Coinglass data shows that more than $200 million worth of BTC has been liquidated in the past 48 hours, and the liquidation is the most severe since April 13. Such liquidations usually trigger a chain reaction, leading to forced selling and further price declines.

The financial pressure on miners has forced them to shut down their equipment and sell BTC. Researchers at CryptoQuant revealed indicators that miners are in trouble, including a sharp drop in computing power of 7.7% and a plunge in mining revenue per hash to near historical lows.

The Bitcoin ETF has experienced net outflows for two consecutive days, with a total outflow of US$34.2 million, which has also led to the decline of the crypto market to a certain extent.

Has the market not bottomed out yet?

Many analysts believe that despite today’s sharp drop, selling pressure will continue and prices will fall further. Most of them predict that BTC will fall to $50,000, or even fall below $50,000 to $40,000.

Josh Gilbert, a market analyst at eToro, said that about $8 billion worth of BTC will flow into the market at the beginning of this month, and the price trend of Bitcoin is expected to deteriorate further in the next few days. The current negative news far outweighs the positive news, and the selling pressure will continue. Prices will be relatively weak in the short term until a catalyst appears in the market to drive prices up.

Swyftx analyst Pav Hundal said that the worst may be yet to come for Bitcoin's price action. Bitcoin's huge drop is about to hit an already indifferent market. The long-term macro environment remains positive, but in the short term we may test $50,000 or even lower. Currently, $52,000 is a key position for both bear and bull markets.

Rachel Lin, CEO and co-founder of SynFutures, said that selling pressure is unlikely to abate in the coming days. Although the market expects that most Mt. Gox users will sell their tokens, a rebound could occur if the selling volume is lower than expected. On the other hand, if there is enough selling to push prices down, the $50,000 level could be seen.

Andrew Kang, co-founder and partner at Mechanism Capital, even believes that his initial estimate of a low of $50,000 is too conservative and that we may see a more extreme pullback to the $40,000 range. The reason is that the current market is similar to the range in May 2021, when Bitcoin and altcoins also experienced a parabolic rise. The current $50 billion-plus cryptocurrency leverage is also close to the historical high (excluding CME), but the range is longer (18 weeks vs. 13 weeks), and there has not yet been an extreme wash, which has been experienced several times during the 2020-2021 bull market. He also predicts that the pullback may last for several months before reversing.

In addition, 10x Research also believes that Bitcoin has the potential to fall further to $50,000, because data from early June already suggests that the time is ripe for an overbought market correction.

Nathan (@26x14eth), co-founder of 7UP DAO, believes that BTC has no chance of falling to 50,000 this week, and even took the initiative to bet 1 BTC to Andrew Kang and 10x Research. In response to Andrew Kang's point of view, he countered that today's market is very different from the past few years. With the launch of BTC ETF, the sentiment of US stocks is affecting the trend of BTC. Unless there is a major shift in macroeconomic data, we will see net inflows of ETFs, which will hedge the selling pressure. The potential impact of the sell-off caused by the Mt. Gox incident on BTC is only about 10%. If the macro market remains stable, the subsequent ETF buying volume will easily absorb these, which is not enough to drive a big drop in BTC.

In addition, he also predicted that "there is not much time left for the bears." The unemployment rate data and non-farm data to be released tonight will be beneficial to the U.S. stock bulls. Based on the performance of the three days after Independence Day in the past five years, all of them are bullish trends. The market will suddenly become clear after the data is released.

NDV partner @Jhy256.BT said that he is still bullish on the crypto market and expects BTC to reach $100,000 by the end of the year. The current selling pressure in the market is foreseeable, including Bitcoin confiscated by the government, the bankruptcy liquidation of MTGox, and the bankruptcy liquidation of FTX, which are all being gradually digested. In addition, the foreseeable buying includes BTC ETF's assets under management (AUM), which only accounts for less than 0.1% of the total allocation of 10 institutions with ETF qualifications. It should reach 1% to be the first milestone. Previously, less than 0.1% of the buying has pushed Bitcoin from $40,000 to $73,000. If there is another 10 times of capital inflow, the Bitcoin price of $100,000 will not be difficult to achieve.