Today, the price of Bitcoin plummeted, falling below $54,000, hitting a new low since February. In the past 24 hours, the total amount of cryptocurrency liquidations exceeded $510 million (about twice as much as yesterday), and more than 188,000 people were liquidated. Just when the cryptocurrency market was just showing signs of recovery, a series of negative news shook the market again, and the entire cryptocurrency circle was "bloody". What exactly caused the decline in cryptocurrency prices? How should investors respond?
The Chinese government is secretly selling
According to a trader, the main reason for this sharp drop was that in an environment dominated by panic, the Chinese government took the lead in dumping the market, followed by large investors selling off, Germany selling off, and Mentougou sentiment... which led to the beginning of a comprehensive collapse.
It is reported that the tokens currently being sold by the Chinese government were seized in the PlusToken case, with a total of 320,000 confiscated. Some were sold in the early stage, and it is estimated that there are still 250,000 to 300,000 (this is also part of the reason why the US ETF bought so much and has a sluggish decline every month). Currently, 200,000 tokens have been processed, and there may be up to 90,000 tokens left.
Germany was clearly doing it, and Mentougou made an advance announcement. Only the Chinese government’s selling was opaque. In the name of technical services, the Chinese government entrusted the tokens to several “companies” in Beijing and Zhejiang to sell. After the company completed the processing, it declared and remitted the tokens into the country in the form of foreign exchange in accordance with the entrustment agreement. The execution company took advantage of the panic sentiment to short at the same time, and chose to sell at 60,300 yesterday. After the price fell below 60,000, it triggered a flight of large investors.
Germany continues to crash
Another large-scale Bitcoin transfer incident occurred in Germany. On July 4, 1,300 BTC were transferred to Coinbase, Kraken and Bitstamp in batches. Coupled with a series of BTC transfer incidents in Germany recently, the panic of Bitcoin selling is increasing.
The German government has sold nearly 9,641 bitcoins in the past 15 days and currently holds 40,359 bitcoins, worth about $2.3 billion. This large-scale and continuous sale of bitcoins has brought a huge impact on the cryptocurrency market. It is reported that these bitcoins came from funds seized by the German Federal Criminal Police (BKA) from the pirated movie website Movie2k in 2013.
Generally speaking, the government should resell Bitcoin through over-the-counter auctions rather than directly transferring large quantities to exchanges. Bitfinex analysts said that the government's transfer of such a large amount of Bitcoin to exchanges is equivalent to bringing more than $450 million in selling pressure to the spot market, coupled with the impact of forced liquidation of long contracts, this behavior has a greater impact on the market than expected.
In response to the German government's move, Tron founder Justin Sun boldly proposed to buy all of the German government's bitcoins off-market to minimize the impact on the market. Sun said he was ready to become a "hero" in the cryptocurrency market again and prevent the German government from dumping the market through exchanges.
At the same time, German MP Markus Ferber called on the German government to stop selling its bitcoins. Ferber believes that the government should not sell through exchanges, which will interfere with the operation of the cryptocurrency market. He suggested that the government should deal with these bitcoin assets through private auctions to minimize the impact on the market.
The German government's motive for selling bitcoins on a large scale is not very clear. Some analysts believe that it may be to fulfill previous promises or to seek funding to cope with the economic downturn. However, until Germany makes a clear statement to stop selling or sell all its bitcoins, the panic in the market will continue to exist.
Mt.Gox starts compensation
According to the official documents circulating, on July 5, 2024, the Mt. Gox repayment trustee made initial repayments to some creditors in Bitcoin and Bitcoin Cash through designated cryptocurrency exchanges. The first batch of payments was made to some designated creditors, while for the remaining creditors, repayment will be "immediately" after certain conditions are met.
Although the news of Mt.Gox's repayment of its debts is seen as a positive development, it may be a "double-edged sword" for the entire cryptocurrency market. According to reports, Mt.Gox has retained a large amount of Bitcoin and Bitcoin Cash during the bankruptcy freeze, with a total value of up to $7 billion. Once these huge amounts of cryptocurrencies are released to the market, they are likely to trigger a large-scale sell-off by investors, dragging down the prices of major cryptocurrencies such as Bitcoin.
While repaying its debts, Mt.Gox also plans to transfer $2.6 billion worth of Bitcoin, Ethereum and other cryptocurrencies it holds to an exchange called Bitbank. In fact, part of the reason for today's cryptocurrency crash is that Mt.Gox is moving $2.6 billion in Bitcoin.
Market concerns about the release of a large amount of Bitcoin by Mt.Gox's repayment plan are continuing to push Bitcoin prices down. Even if Mt.Gox has formulated a prudent repayment plan, it is difficult to completely avoid the situation where creditors quickly sell after receiving the compensation. After all, these creditors have been waiting for this compensation for many years and may be eager to cash out once they get it.
Summarize
Data shows that the frequency of mentions of "bottom-fishing" is spreading rapidly on social media. However, not every such call works. Whether the price of Bitcoin can rebound depends largely on the expectations of market participants for the future market. If the vast majority of people believe that the price will rise, then there is a high probability that there will be a wave of bottom-fishing, which will trigger a rebound in prices. On the contrary, if the market is generally cautious, the possibility of price decline is greater.
According to the Fear and Greed Index of Cryptocurrency provided by the algorithmic trading platform Alternative.me, the index is currently 44, which is in the "panic" range. This shows that the market sentiment is cautious and it may not be the best time to buy the bottom for the time being. The worst may not come yet, and the market sentiment may further deteriorate, bringing more risks to investors. At this time, investors need to be cautious at all times. Because only when investors lose confidence completely, the price of Bitcoin will be able to stabilize and rebound.
