In the last 24 hours, the price of bitcoin (btc) fell as much as 4.8%, falling to a new low of $60,601 after trading above $64,000 just a day earlier. This drop can be attributed to a combination of factors, including the events of the Mt. Gox saga, a significant liquidation of long positions, and the ongoing mining capitulation.
#1 Mt. Gox News shakes market confidence
The sudden and sharp drop from $62,900 to $60,601 in the price of bitcoin coincided closely with a new announcement from the administrators of the defunct bitcoin exchange, Mt. Gox. This exchange, central to one of the first and largest bitcoin thefts, declared that it would begin paying victims using assets stolen from a 2014 hack in July 2024.
According to Nobuaki Kobayashi, rehabilitation administrator, the payment process will include bitcoin (btc) and bitcoin Cash (BCH) and will begin in early July. “The Rehabilitation Trustee has been preparing to make refunds in bitcoin and bitcoin Cash under the Rehabilitation Plan (…) Refunds will be made from the beginning of July 2024,” said the Rehabilitation Trustee. advertisement read.
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This news was perceived negatively by the market, mainly due to fears of oversupply by beneficiaries who are likely to sell assets that have appreciated greatly since their initial investment period before 2013. In May 2023, the trustee moved more than 140,000 btc, worth approximately $9 billion.
This transaction was significant because it was the first movement of these funds in five years, closely followed by analysts and traders. The market reactions were immediate; bitcoin prices fell as speculation took hold about a possible flooding of the market with these redeemed coins.
#2 Record liquidations of long positions
Adding to the downward pressure, there was a notable increase in the liquidation of long positions in btc. According to the latest data Coinglass, a staggering $85.4 million worth of long positions were liquidated. This event marks the largest liquidation since April 30 and May 1, when more than $195 million ($95 million and $100 million respectively) in long positions were liquidated, correlating with a 12.5% price drop. during those two days.
These liquidations occur when the market price reaches the liquidation price of the leveraged positions, triggering automatic liquidations to cover losses, driving the price down further. This cascading effect contributes significantly to rapid price declines and increased market volatility.
#3 Ongoing mining capitulation adds to selling pressure
The third critical factor affecting the price of bitcoin is the current capitulation of miners. Miner capitulation refers to a situation where miners, particularly those operating at marginal efficiency, begin selling their mined btc to cover operating costs due to lack of profitability. This phase can put substantial downward pressure on bitcoin prices as it increases the supply of bitcoin being sold in the market.
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As NewsBTC reported, renowned crypto analyst Willy Woo and others have noted that miner capitulation is a crucial phase to monitor, especially after bitcoin halving events that cut miner rewards in half, which affects its profitability. Woo recently noted that the recovery from such capitulations has historically been slow and closely tied to the resurgence of mining activity and hash rates.
crypto expert Jelle, speaking through x, x.com/CryptoJelleNL/status/1805135204152914096″ target=”_blank” rel=”nofollow”>highlighted the ongoing nature of this capitulation today, saying: “Hash Ribbons is showing that miner capitulation is ongoing, exactly what you want to see after the halving. Generally speaking, the market starts to recover once the capitulation phase is over.”
At the time of publication, btc was trading at $61,241.
Featured image from iStock, chart from TradingView.com
