The Coin World reported:
China Fund News by Tyler
Dear brothers and sisters, let’s first take a look at the situation of cryptocurrencies. Today, they collectively plummeted.
Cryptocurrency Takes a Dive
On July 5th, the cryptocurrency market experienced large-scale sell-offs, with Bitcoin falling for the fourth consecutive trading day to its lowest level since February. This contrasts sharply with the recent record highs in global stock markets.
Bitcoin once dropped below $54,000 per coin, down 7% intraday; Ethereum has dropped over 6%; smaller coins like Ripple and Dogecoin experienced even more severe losses, with some dropping over 10%.
According to Coinglass data, over the past 24 hours, over 230,000 people were liquidated in the virtual currency market, with a total liquidation amount of $679 million.
What’s Happening Behind the Scenes
According to market analysis, there are several reasons for the significant drop in the cryptocurrency market.
First, decreased demand for U.S. Bitcoin exchange-traded funds.
The frenzy sparked by U.S. Bitcoin ETFs pushed Bitcoin to a record high of nearly $74,000 in March, but as bets on Fed rate cuts weakened, the demand for high-risk investments took a hit, leading to a significant decrease in funds flowing into these products.
Second, government disposal of confiscated bitcoins.
According to Bitcoin Magazine, the German government has transferred a portion of its substantial Bitcoin reserves to exchanges. Based on blockchain data, the Federal Criminal Police Office (BKA) in Germany transferred around $75 million worth of Bitcoin in several transactions on July 4th. These funds were spread across exchanges including Coinbase, Kraken, and Bitstamp. Since mid-June, the German government has moved about $315 million worth of Bitcoin to various platforms. Germany has sold over $390 million worth of Bitcoin in less than a month. In 2013, the BKA seized nearly 50,000 bitcoins related to the former operator of the movie piracy website Movie2K. At today’s prices, these assets are estimated to be worth $2.3 billion.
Third, the compensation payout from the former leading cryptocurrency exchange Mt. Gox triggering the Bitcoin collapse.
The bankrupt exchange Mt. Gox is set to start repaying Bitcoin to creditors, which could add pressure to the market supply.
The exchange suffered numerous hacking attacks between 2011 and 2014, resulting in the loss of a significant amount of Bitcoin, ultimately collapsing in 2014.
After nearly a decade of waiting, Mt. Gox is set to begin returning Bitcoin to customers in July 2024. Although the exact amount is yet to be determined, estimates range between 65,000 to 140,000 bitcoins, which at current prices could amount to nearly $9 billion.
This impending large-scale supply entering the market has sparked concerns among investors about price declines.
Analysts state that most of the sell-off can be attributed to concerns over the repayment to Mt. Gox creditors, with around $8 billion worth of Bitcoin expected to enter the market starting this month.
