Bitcoin's 4.5% Dip Linked to ETF Outflows and Anticipated Sales from German Government and Mt. Gox
Summary:
Bitcoin (BTC) dropped 4.5% to a six-week low on June 21 due to outflows from spot exchange-traded funds and expected sales from the German government and repayments to Mt. Gox creditors. The depreciation of Bitcoin stretched until June 24 owing to Mt. Gox’s plan to reimburse victims of a 2014 security breach, placing significant selling pressure on BTC. Additionally, steady outflows from the U.S.-based spot Bitcoin ETFs and the rise of the U.S. dollar against foreign currencies have also impacted Bitcoin prices. The last day witnessed widespread liquidation of long positions in the Bitcoin derivatives market, contributing to the downtrend in Bitcoin's price.
Bitcoin (BTC) plunged by 4.5% to a six-week low of $59,780 on June 21. This was triggered by steady outflows from Bitcoin’s spot exchange-traded funds (ETFs) and anticipated sales from the German government and the planned repayments to Mt. Gox creditors. The correction persisted until June 24 amidst negative perception due to crypto exchange Mt. Gox’s intention to reimburse over 140,000 BTC to victims of a 2014 security breach starting from July. Mt. Gox owes nearly $9.4 billion in Bitcoin to nearly 127,000 creditors who have been awaiting their funds for more than a decade. Given the more than 8,000% surge in Bitcoin’s price since 2014, this could place heavy selling pressure on BTC. Investors making substantial profits might decide to cash in at the prevailing rates.
Senior ETF analyst at Bloomberg, Eric Balchunas remarked that this could significantly influence market sell pressure. Daan Crypto Trades, a well-known trader, also held the opinion that the Mt. Gox repayments would vastly impact BTC's price.
Additional selling pressure is likely to come from the German government after almost 6,500 BTC were moved from its wallet on June 19. Since February 2024, the wallet has held around 50,000 BTC, which is worth above $3 billion at the current rates.
There have also been consistent outflows from the U.S.-based spot Bitcoin ETFs since June 24, with a staggering $1.12 billion withdrawals in the last fortnight. CoinShares data reveals that between June 17 and June 21, Bitcoin investment products experienced outflows of $630 million, illustrating that a real correction is happening currently.
An increase in the value of the U.S. dollar against other major currencies has amplified the investors' risk-averse mood. Misleading macroeconomic data from the U.S. and the Federal Reserve's cut in the likelihood of rate cuts from four to one in 2024 have also contributed to the BTC price fall.
Market watchers continue to expect that the Fed will start slashing interest rate in September. This anticipation of higher interest rates decreases the risk appetite for assets like cryptocurrencies, which has affected Bitcoin prices in the recent period.
In the last 24 hours, there has been a broader liquidation of positions, with over $128.91 million worth of liquidations in the Bitcoin derivatives market, which included $119.01 million worth of long positions. The total liquidations across the crypto market added up to $250 million, out of which $173 million were long liquidations.
CryptoQuant data also shows a fluctuation in the Bitcoin reserves on exchanges on June 13, suggesting an increased selling pressure in the market. With a rising quantity of BTC stored in exchange wallets, investors seem to be capitalizing on the current prices, explaining the present drop in price.
Published At
6/25/2024 12:12:58 AM
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