Yesterday morning, Bitcoin fell below $63,000 again, and Ethereum fell below $3,400. The entire crypto market seemed to fall into darkness and confusion again. The community was full of FUD voices. Although the top currencies have not fallen to the level of April this year, the decline of many blue-chip altcoins has already caught up with the early bull market last year. One voice seems to represent the new voice of all players: Will it fall further? Where is the bottom?

Unfortunately, the crypto market faced huge selling pressure after the trustee of the Mt.Gox bankruptcy estate announced that it would begin returning Bitcoin (BTC) and Bitcoin Cash (BCH) to creditors in July. More than 140,000 BTC and BCH will be distributed to creditors. Affected by this news, Bitcoin once fell below $59,000 during the session, a 24-hour drop of nearly 6%.

Altcoins followed Bitcoin's decline, and the top 200 tokens by market capitalization fell more than they rose. The current overall market capitalization of cryptocurrencies is $2.21 trillion, with Bitcoin's market share at 53.2%.

Many people blame the market for "overreacting" to the Mt.Gox selling pressure. After all, the news was released at a time when Bitcoin was shaky, and there was no way to avoid the intention of selling. It should be noted that the number of tokens ultimately distributed in the Mt.Gox bankruptcy case will be less than people imagined, and the Bitcoin selling pressure caused by Mt.Gox will be less than expected. So what other negative factors are to blame?

1. Mt.Gox repayment selling pressure

According to Tree News, Mt. Gox will begin repayments in Bitcoin and BCH in early July 2024. Kobayashi said: "Repayments will begin in July 2024." He added that due diligence and certain security measures are required before the payment is completed.

As of June 24, 2024, Mt.Gox trustees hold approximately 141,686 BTC, or 0.72% of the circulating supply of Bitcoin, valued at approximately $9,260,336,411. Since the consolidation of funds on May 30, 2024, these addresses have only transferred out 0.00001638 BTC.

Traders say the repayments are largely seen as adding to selling pressure in the bitcoin market, as early investors will receive the asset at a much higher price than their entry price before 2013, making them inclined to sell at least some of their holdings.

Data from CoinGecko shows that within minutes of Mt. Gox’s announcement, the price of Bitcoin fell from more than $62,300 to below $62,100. Combined with the 14,000 BTC transferred from the Mt. Gox address a month ago, the market immediately reacted to the risk aversion after the news came out, causing BTC to plummet in the short term, once dropping below $61,000.

2. Bitcoin spot ETFs have seen a large outflow and a decrease in inflows

On June 23, according to HODL15Capital monitoring, the US Bitcoin spot ETF sold 7,690 BTC in the past week (Week 24).

On June 21, the U.S. Bitcoin spot ETF saw outflows for five consecutive days, with the total outflow exceeding $900 million in the past week. Grayscale GBTC and Fidelity FBTC were the largest buyers, with only BlackRock IBIT buying.

Bitfinex noted that outflows from listed spot Bitcoin ETFs exacerbated negative sentiment, with outflows totaling $544.1 million last week, although this was related to fundamental/capital arbitrage and not necessarily true sentiment towards BTC.

However, historically, even in bull markets, Bitcoin has fallen 4-5 times per year by 20-30%, so in my opinion, this correction is nothing to worry about. In the 2017 bull market, Bitcoin fell 20-30% as many as 10 times, but still hit all-time highs. In the 2020-2021 bull market, Bitcoin fell 20-30% 4 times, but still hit all-time highs.

3. Large-scale token unlocking and selling pressure

In terms of time, a week after May 26, OP, DYDX, SUI and other tokens will usher in a one-time large-scale unlocking, with a total release value of about US$380 million. From June 10 to 16, tokens worth US$363.79 million will be unlocked. Starting from June 24, the mainstream crypto projects on the entire network will unlock tokens worth a total of US$188 million in the next 7 days.

Altcoin prices have fallen sharply as the market has difficulty digesting the huge token unlocking of a series of projects, most of which were purchased by early investors or locked up for ecosystem development and grants. Here is a simple example:

Ethereum L2 network Arbitrum’s ARB token is trading near its all-time low since September last year, despite its market cap rising from $1 billion to $2.5 billion, due to a significant increase in supply.

Another example is Solana, whose supply is increasing by 75,000 tokens per day, worth about $10 million at current prices.

In addition, Bitcoin miners have started to sell their Bitcoin inventory. Since June, Bitcoin miners have sold more than 30,000 BTC (about $2 billion), and after the current Bitcoin block reward halving event, Bitcoin miners' TH/s revenue (7-day MA) has hit a record low in the past two months. In addition to the halving, another possible reason for the reduction in miners' revenue is the low number of new wallets entering the Bitcoin ecosystem, which is currently at its lowest level since 2018 (7-day MA).

4. Investors actively sell off and FUD sentiment spreads

Let’s start with the 19th. A wallet address marked as the German ZF (German Government BKA) sold about 6,500 BTC today. It is reported that the encrypted wallet has held nearly 50,000 BTC since February 2024. These funds were seized from the pirated movie website operator Movie2k. It currently still holds 43,359 BTC, worth US$2.83 billion.

On June 23, Bank of America reported that investors withdrew $300 million from the gold market, $400 million from the cryptocurrency market, and $15.8 billion from cash last week. The recent continuous plunge in the crypto market has caused investors to doubt the current bull market, believing that it is a false bull market. Many blue-chip altcoins are gradually falling to the initial level of the bull market in October and November last year, and some have even fallen to a deep bear market.

5. Macro level: unclear supervision and policy pressure

The crypto market is also facing the potential impact of the US presidential election. Although there have been reports that Biden may "soften" his attitude towards cryptocurrencies, his rival Trump has clearly stated that he is crypto-friendly, so the risk of Biden increasing the suppression of the crypto market during the campaign cannot be ruled out.

In addition, Bloomberg ETF analysts Eric Balchunas and James Seyffart said that the launch date of the Ethereum spot ETF may be brought forward to July 4. The reason is that SEC staff sent comments on S-1 to the issuer last week, and the comments were brief and there were no major problems. They required the revision to be completed and submitted before this Friday (June 21).

6. Binance’s new coins perform poorly

In fact, last Sunday, the article mentioned that the community questioned Binance's listing of coins and the poor performance of new coins after listing. At the same time, it questioned that the price of VC coins was inflated and the bubble was obvious, which had a negative impact on the long-term development of the entire industry. The view that the excessive listing of "VC-related tokens" drained the market liquidity was rampant. Anti-VC rhetoric has been emerging since the inscription era, and has become a banner and slogan in the meme boom. This time the decline has intensified this contradiction to a new level.

Binance frequently lists coins, objectively speaking, it is undeniable that it will dilute a lot of attention and liquidity. When large-cap VC projects are delivered to the market in batches, the market liquidity simply cannot bear so many VCs worth billions or tens of billions. From another perspective, if these projects are not listed on Binance, they will also be listed elsewhere.

What is the limit of BTC retracement?

As we all know, there were two terrifying black swan events in the last cycle, which also triggered a sharp drop in BTC prices. From the figure below, we can see that when the March 12 event occurred, STH-MVRV was as low as 0.59; when the May 19 event occurred, STH-MVRV was as low as 0.67. This means that on March 12, STH (short-term holders) suffered an average floating loss of 41%, and on May 19, STH (short-term holders) suffered an average floating loss of 33%. It can be seen how tragic the market was at that time.

There have also been three impressive market capitulation events in this cycle:

1. On March 10, 2023, Silicon Valley Bank collapsed, and the price of BTC fell from $25,000 to $20,000. During this period, STH-MVRV dropped to a minimum of 1.02;

2. On June 5, 2023, Binance was sued by the SEC. The price of BTC fell from US$30,000 to US$25,000. During this period, STH-MVRV dropped to a low of 0.95.

3. On August 17, 2023, it was reported that SpaceX sold $373 million worth of BTC, triggering long leverage liquidation, during which STH-MVRV dropped to a low of 0.91;

The STH-MVRV values ​​under these special events correspond to the current BTC prices as follows:

STH-MVRV 0.59 = $37,979

STH-MVRV 0.67 = $43,129

STH-MVRV 1.02 = $65,659

STH-MVRV 0.95 = $61,153

STH-MVRV 0.91 = $58,579

As of June 21, STH-MVRV is 0.99. In the course of a bull market, when STH-MVRV is below 1, opportunities usually outweigh risks (only for BTC, not including ALT).