In the last few days, the price of Bitcoin has fallen by more than 15%, with a significant drop of 7.8% in the past 24 hours alone. This decline has brought the price of BTC down to almost 25% from its high of nearly $72,000 in early June. Several factors have contributed to this sudden drop in price.
The first reason behind the price crash is the impending distribution of 142,000 BTC by the defunct crypto exchange Mt. Gox. This distribution has caused market anxiety as creditors of the exchange are set to receive a portion of the Bitcoin supply. Large transfers of BTC have already been made, indicating that a significant disbursement is on the horizon. The fear of massive selling by these creditors has led to preemptive selling among Bitcoin holders, adding to market instability.
Another factor impacting the price of Bitcoin is the German government’s decision to liquidate a portion of its Bitcoin holdings. This move has raised concerns among market participants about continuous sell-offs by major holders like governments, which could further decrease prices.
Additionally, there has been a surge in the liquidation of long positions in the Bitcoin market, with $212 million worth of BTC liquidated in the past 48 hours. Such liquidations can trigger forced sell-offs and contribute to price declines, indicating a highly leveraged market with potential volatility.
The recent Bitcoin halving event has also led to miner capitulation, with miners facing economic pressures due to diminishing returns. This has resulted in a significant drop in hashrate and mining revenue, forcing many miners to sell off their BTC holdings.
Furthermore, there has been a slowdown in US spot Bitcoin ETF activity, contrary to expectations of institutional investments driving market growth. The lackluster performance of spot ETFs has failed to attract the anticipated institutional money, leading to subdued activity in this sector.
Despite these challenges, the direct impact of Bitcoin ETFs on market sentiment remains relatively minor, with long-term holders selling off their holdings in large numbers being the primary driver of downward pressure on the market.
At the time of writing, Bitcoin is trading at $54,434, reflecting the recent price decline. These various factors have contributed to the recent crash in Bitcoin price, highlighting the volatile nature of the cryptocurrency market and the influence of external events on its value.