CoinJi reported:
By China Fund News, Tyler
Dear readers, let’s first delve into the current situation of cryptocurrencies—today, they collectively experienced a flash crash.
Cryptocurrencies Plunge
On July 5th, the cryptocurrency market faced widespread selling, with Bitcoin marking its fourth consecutive day of decline, hitting its lowest level since February. This stands in stark contrast to recent record highs in global stock markets.
Bitcoin, at one point, fell below $54,000 per coin, dropping 7% within the day; Ethereum saw a decline of over 6%. Smaller coins like Ripple and Dogecoin suffered even greater losses, some plummeting more than 10%.
According to Coinglass data, over the past 24 hours, the cryptocurrency market saw over 230,000 liquidations, totaling $679 million.
What’s Behind the Drop
Market analysis suggests several reasons behind the sharp cryptocurrency market sell-off.
Firstly, reduced demand for U.S. Bitcoin exchange-traded funds (ETFs).
The frenzy sparked by U.S. Bitcoin ETFs propelled Bitcoin to a record high of nearly $74,000 in March. However, diminished bets on Federal Reserve rate cuts have dampened demand for high-risk investments, resulting in significantly reduced inflows into these products.
Secondly, government disposal of confiscated Bitcoin.
According to Bitcoin Magazine, the German government has moved a portion of its substantial Bitcoin reserves to exchanges. Blockchain data shows that on July 4th, Germany’s Federal Criminal Police Office (BKA) transferred Bitcoin worth approximately $75 million in multiple transactions. These funds were distributed across exchanges including Coinbase, Kraken, and Bitstamp. Since mid-June, the German government has transferred around $315 million worth of Bitcoin to various platforms. Within less than a month, Germany has sold over $390 million worth of Bitcoin. In 2013, the BKA seized nearly 50,000 Bitcoins associated with the former operator of the pirated movie website Movie2K. Today, these assets are valued at an estimated $2.3 billion.
Thirdly, compensation payouts from Mt. Gox, once the largest exchange in the crypto sphere, triggering Bitcoin’s collapse.
The bankrupt exchange Mt. Gox is set to begin compensating creditors with Bitcoin, potentially increasing market supply pressure. The exchange suffered multiple hacking incidents from 2011 to 2014, resulting in the loss of a large amount of Bitcoin and eventual closure in 2014.
After nearly a decade of waiting, Mt. Gox is scheduled to commence Bitcoin repayments to customers in July 2024. Though the exact amount remains undetermined, estimates range from 65,000 to 140,000 Bitcoins. At current prices, this could total nearly $9 billion.
This impending influx of supply into the market has fueled concerns among investors about price declines.
Analysts suggest that much of the selling can be attributed to apprehensions over Mt. Gox creditor repayments, with approximately $8 billion worth of Bitcoin expected to enter the market this month.