Coin World reports:
Today, the price of Bitcoin plummeted, breaking below $54,000, setting a new low since February. In the past 24 hours, the total liquidation amount in the cryptocurrency network exceeded $510 million (about twice that of yesterday), with over 188,000 people liquidated. Just as the cryptocurrency market showed signs of warming up, a series of bearish news once again shook the market, causing a “bloodbath” in the coin circle. What exactly caused the cryptocurrency price to fall? How should investors respond?
Secret Sell-Off by the Chinese Government
A trader revealed that the main reason for this plunge is the panic-driven environment where the Chinese government took the lead in dumping the market, followed by large holders, German sell-offs, and Mentougou sentiment, leading to the start of a complete collapse.
It is reported that the tokens currently being sold off by the Chinese government are those confiscated in the PlusToken case, totaling 320,000 tokens. Some were sold earlier, and it is estimated that there are still 250,000 to 300,000 tokens remaining (which is partly why the US ETFs bought so much, contributing to the monthly dead-cat bounce). Currently, 200,000 tokens have been dealt with, and there may be up to 90,000 left.
Germany is openly dumping, Mentougou has given early warnings, but only the Chinese government’s sale is opaque. Under the guise of technical services, the Chinese government entrusted several “companies” in Beijing and Zhejiang to sell the tokens. After the companies completed the process, they declared the foreign exchange earnings according to the entrustment agreement. The executing companies took advantage of the panic to short-sell synchronously, choosing to dump at yesterday’s price of $60,300, causing a flight of large holders after breaking below $60,000.
Continuous Dumping by Germany
Germany witnessed another large Bitcoin transfer event on July 4th, with 1,300 BTC transferred in batches to Coinbase, Kraken, and Bitstamp. Coupled with a series of BTC transfer events in Germany recently, the panic of Bitcoin sell-offs is intensifying.
In the past 15 days, the German government has sold nearly 9,641 Bitcoins and still holds 40,359 Bitcoins, valued at approximately $2.3 billion. This large-scale continuous selling of Bitcoin has brought a huge shock to the cryptocurrency market. These Bitcoins are said to originate from funds seized by the German Federal Criminal Police Office (BKA) in 2013 from the pirated movie website Movie2k.
Typically, governments should auction off Bitcoins in over-the-counter transactions rather than transferring them directly to exchanges. A Bitfinex analyst stated that the government’s transfer of such a large amount of Bitcoin to exchanges is equivalent to bringing over $450 million of selling pressure to the spot market, compounded by the forced liquidation of long contracts, impacting the market more than expected.
In response to the German government’s actions, Tron founder Justin Sun boldly proposed to purchase all of the German government’s Bitcoins over-the-counter to minimize market impact. Sun expressed his readiness to become the “hero” of the cryptocurrency market once again, preventing the German government from dumping through exchanges.
At the same time, German legislator Markus Ferber called for the German government to stop selling its Bitcoins. Ferber believes that the government should not sell through exchanges, as it would disrupt the operation of the cryptocurrency market. He suggested that the government should handle these Bitcoin assets through private auctions to minimize market impact.
The motive behind the German government’s massive Bitcoin sell-off is not very clear. Some analysts believe it may be to fulfill previous commitments or to seek funding sources in response to economic downturns. However, market panic will persist until Germany explicitly states a halt in sales or sells off its remaining Bitcoin holdings.
Mt.Gox Begins Compensation
According to official documents circulated, on July 5, 2024, Mt.Gox’s repayment trustee made preliminary repayments to some creditors in Bitcoin and Bitcoin Cash through designated cryptocurrency exchanges. The first batch paid was to some specified creditors, and for the remaining creditors, repayment will “immediately proceed” once certain conditions are met.
Although the news of Mt.Gox’s debt repayment is seen as a positive development, it could be a double-edged sword for the entire cryptocurrency market. Reports indicate that Mt.Gox has retained a large amount of Bitcoin and Bitcoin Cash during the bankruptcy freeze, valued at up to $7 billion. The release of such a large amount of cryptocurrency to the market could trigger a massive sell-off by investors, dragging down the prices of major cryptocurrencies like Bitcoin.
While repaying debts, Mt.Gox also plans to transfer its holdings of Bitcoin, Ethereum, and other cryptocurrencies valued at $2.6 billion to an exchange called Bitbank. In fact, part of today’s cryptocurrency crash is due to Mt.Gox moving $2.6 billion worth of Bitcoin.
The market’s concern over Mt.Gox’s repayment plan releasing a large amount of Bitcoin continues to drive the price of Bitcoin downward. Even with a cautious repayment plan from Mt.Gox, it is difficult to completely avoid the situation where creditors quickly sell off after receiving compensation. After all, these creditors have been waiting for this payment for years and may be eager to cash out once they receive it.
Conclusion
Data shows that the frequency of mentions of “buying the dip” is rapidly spreading on social media. However, not every call to action is effective. Whether Bitcoin prices can rebound largely depends on market participants’ expectations for the future. If the majority believe that prices will rise, then a wave of bottom-fishing is most likely to occur, triggering a price rebound. Conversely, if the market maintains a cautious attitude, the likelihood of a price decline is greater.
According to the cryptocurrency Fear and Greed Index provided by the algorithmic trading platform Alternative.me, the current index is at 44, in the “fear” range. This indicates that market sentiment is cautious, and it may not yet be the best time to buy the dip. The worst may not have come yet, and market sentiment could further deteriorate, posing more risks to investors. At this time, investors need to remain vigilant. Because only when investor confidence is completely lost, Bitcoin prices may stabilize and rebound.
