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Germans, Mt. Gox, or Feds: Who Caused Bitcoin’s Crash?
Bitcoin’s dollar value remains extremely volatile. Although there were signs of recovery over the weekend, the value collapsed this morning (Monday) as Asian markets opened. What is causing this decline? Is it due to the expected Mt. Gox refund or the Germans dumping their Bitcoin stash? Also, the US Fed’s rate cut decisions cannot be ignored.
A bloody week
Bitcoin peaked at nearly $74,000 earlier this year, boosted by the approval of long-awaited spot Bitcoin exchange-traded funds (ETFs) in the United States. However, due to periodic volatility, the cryptocurrency is trading around $57,500, down about 23 percent.
In the last week alone, the value of Bitcoin has dropped by about 10 percent.
As always, the reasons behind Bitcoin’s volatility are mixed. However, this time, the bearish sentiments may have been triggered by some events.
Bitcoin price trend over the last month
A $9 billion payment
A major trigger could be the upcoming repayment to creditors of the now defunct cryptocurrency exchange Mt. Gox. After a decade of countless delays, the administrator of Mt. Gox has finally decided to Repaying Distressed Creditors in Bitcoin and Bitcoin Cash.
At its peak, Mt. Gox handled 70 percent of all Bitcoin transactions. However, the exchange lost approximately 740,000 Bitcoin, leading to its closure in 2014.
Recently, Bitcoin wallets related to Mt. Gox moved 47,228 Bitcoin. However, it was unclear whether those Bitcoins were moved for the purpose of redemption. The anticipation of such a massive volume of Bitcoin hitting the market may have created selling pressure, resulting in recent volatility.
THE Mount Gox The payout is estimated at $9 billion. However, experts believe that the $1.1 trillion Bitcoin market has the potential to absorb the pressure of the sell-off by Mt. Gox creditors.
“Mount Gox has moved [a massive amount of] BTC, signaling the start of their refund process, which has caused some fear in the market due to the large potential sell-off,” Willy Chuang, COO of cryptocurrency exchange WOO X, told cryptocurrency-focused publication Coindesk. “However, it is worth noting that despite these concerns, the long-term impact may be less severe as the market gradually absorbs the selling pressure.”
The German sell-off
Another major reason for Bitcoin’s latest downward spiral could be the sale of Bitcoin seized by German authorities. Earlier this year, German law enforcement 50,000 Bitcoins Seized Linked to Piracy Website
After months of holding those seized cryptocurrencies, wallets linked to the German government moved 6,500 Bitcoin, worth about $425 million at the time. After a series of transactions, 1,000 of those Bitcoins were sent to two cryptocurrency exchanges, Kraken and Bitstamp. On-chain analyst Arkham also confirmed that the German government moved another 1,300 Bitcoins, worth $76 million, to Kraken, Bitstamp, and Coinbase on July 4, after which the price of Bitcoin took a hit.
The German government also transferred another 1,700 Bitcoin to an address likely transferred “for an institutional or OTC service.”
Despite the sales, the German government still holds a substantial amount of Bitcoin from the seizure. Likewise, the U.S. government accumulated a considerable amount of Bitcoin from seizures carried out over the years following illegal operations.
Are they the feds?
Although this is a regular occurrence, the US Federal Reserve’s decision could be another factor behind Bitcoin’s volatility. On Thursday, the Fed decided not to cut interest rates for another cycle. Even though rate cuts are not directly related to Bitcoin, higher interest rates always cause investors to keep their money away from risky investments like Bitcoin.
The federal funds rate is currently at 5.5%, significantly higher than the 0.25% rate in March 2022.
The US interest rate over the last 5 years
Room for upward movement
Bitcoin entered the mainstream financial market earlier this year when the Securities and Exchange Commission approved spot Bitcoin ETFs. Major asset managers such as BlackRock and Fidelity, along with nine other issuers, are now listing spot Bitcoin ETFs on U.S. stock exchanges.
Additionally, the mining reward of Bitcoin was halved earlier this year, an event that has historically had a positive impact on the cryptocurrency’s price performance.
Despite the recent volatility, many analysts are still bullish on Bitcoin. According to analysts at cryptocurrency data and research firm CCData, Bitcoin has yet to peak in its current appreciation cycle and is likely to hit a new all-time high.
CCData stressed that Bitcoin Halving has always preceded a period of price expansion, lasting between 12 and 18 months “before producing a cycle peak”. These historical time intervals have yet to pass after the last halving on April 19, 2024.
“Furthermore, we have observed a decline in trading activity on centralized exchanges for nearly two months after the halving event in previous cycles, which appears to have mirrored this cycle. This suggests that the current cycle could expand further into 2025,” the CCData report said.
Bitcoin’s dollar value remains extremely volatile. Although there were signs of recovery over the weekend, the value collapsed this morning (Monday) as Asian markets opened. What is causing this decline? Is it due to the expected Mt. Gox refund or the Germans dumping their Bitcoin stash? Also, the US Fed’s rate cut decisions cannot be ignored.
A bloody week
Bitcoin peaked at nearly $74,000 earlier this year, boosted by the approval of long-awaited spot Bitcoin exchange-traded funds (ETFs) in the United States. However, due to periodic volatility, the cryptocurrency is trading around $57,500, down about 23 percent.
In the last week alone, the value of Bitcoin has dropped by about 10 percent.
As always, the reasons behind Bitcoin’s volatility are mixed. However, this time, the bearish sentiments may have been triggered by some events.
Bitcoin price trend over the last month
A $9 billion payment
A major trigger could be the upcoming repayment to creditors of the now defunct cryptocurrency exchange Mt. Gox. After a decade of countless delays, the administrator of Mt. Gox has finally decided to Repaying Distressed Creditors in Bitcoin and Bitcoin Cash.
At its peak, Mt. Gox handled 70 percent of all Bitcoin transactions. However, the exchange lost approximately 740,000 Bitcoin, leading to its closure in 2014.
Recently, Bitcoin wallets related to Mt. Gox moved 47,228 Bitcoin. However, it was unclear whether those Bitcoins were moved for the purpose of redemption. The anticipation of such a massive volume of Bitcoin hitting the market may have created selling pressure, resulting in recent volatility.
THE Mount Gox The payout is estimated at $9 billion. However, experts believe that the $1.1 trillion Bitcoin market has the potential to absorb the pressure of the sell-off by Mt. Gox creditors.
“Mount Gox has moved [a massive amount of] BTC, signaling the start of their refund process, which has caused some fear in the market due to the large potential sell-off,” Willy Chuang, COO of cryptocurrency exchange WOO X, told cryptocurrency-focused publication Coindesk. “However, it is worth noting that despite these concerns, the long-term impact may be less severe as the market gradually absorbs the selling pressure.”
The German sell-off
Another major reason for Bitcoin’s latest downward spiral could be the sale of Bitcoin seized by German authorities. Earlier this year, German law enforcement 50,000 Bitcoins Seized Linked to Piracy Website
After months of holding those seized cryptocurrencies, wallets linked to the German government moved 6,500 Bitcoin, worth about $425 million at the time. After a series of transactions, 1,000 of those Bitcoins were sent to two cryptocurrency exchanges, Kraken and Bitstamp. On-chain analyst Arkham also confirmed that the German government moved another 1,300 Bitcoins, worth $76 million, to Kraken, Bitstamp, and Coinbase on July 4, after which the price of Bitcoin took a hit.
The German government also moved another 1,700 Bitcoin to an address likely moved “for an institutional or OTC service.”
Despite the sales, the German government still holds a substantial amount of Bitcoin from the seizure. Likewise, the U.S. government accumulated a considerable amount of Bitcoin from seizures carried out over the years following illegal operations.
Are they the feds?
Although this is a regular occurrence, the US Federal Reserve’s decision could be another factor behind Bitcoin’s volatility. On Thursday, the Fed decided not to cut interest rates for another cycle. Even though rate cuts are not directly related to Bitcoin, higher interest rates always cause investors to keep their money away from risky investments like Bitcoin.
The federal funds rate is currently at 5.5%, significantly higher than the 0.25% rate in March 2022.
The US interest rate over the last 5 years
Room for upward movement
Bitcoin entered the mainstream financial market earlier this year when the Securities and Exchange Commission approved spot Bitcoin ETFs. Major asset managers such as BlackRock and Fidelity, along with nine other issuers, are now listing spot Bitcoin ETFs on U.S. stock exchanges.
Additionally, the mining reward of Bitcoin was halved earlier this year, an event that has historically had a positive impact on the cryptocurrency’s price performance.
Despite the recent volatility, many analysts are still bullish on Bitcoin. According to analysts at cryptocurrency data and research firm CCData, Bitcoin has yet to peak in its current appreciation cycle and is likely to hit a new all-time high.
CCData stressed that Bitcoin Halving has always preceded a period of price expansion, lasting between 12 and 18 months “before producing a cycle peak”. These historical time intervals have yet to pass after the last halving on April 19, 2024.
“Furthermore, we have observed a decline in trading activity on centralized exchanges for nearly two months after the halving event in previous cycles, which appears to have mirrored this cycle. This suggests that the current cycle could expand further into 2025,” the CCData report said.