Bitcoin set for worst week in over a year on Mt. Gox liquidation fears
Bitcoin was set for its biggest weekly fall in more than a year on Friday, as traders fretted over the likely dumping of tokens from defunct Japanese exchange Mt. Gox and further selling by leveraged players after the cryptocurrency’s strong run.
The price of the world’s largest cryptocurrency slid as much as 8% on the day to $53,523, its lowest since late February.
It was on track for a more than 12% weekly decline, its biggest since early November 2022.
Rival token Ether slid 9% to $2,841 to more than a two-month low.
Media reports said Mt. Gox, the world’s leading exchange for cryptocurrencies before it collapsed a decade ago, may start returning bitcoin to creditors, who are seen as likely sellers since the token’s worth was only hundreds of dollars in 2014.
“The selling pressure is still related to creditor selling from the failed Mt Gox exchange,” said Tony Sycamore, a market analyst at IG.
“However, the acceleration to the downside suggests the market is trying to get ahead of the creditor flows.”
Analysts have also pointed to worries over the possibility of Joe Biden being replaced as the Democrats’ presidential nominee by someone less pro-crypto after a shaky debate performance with rival candidate Donald Trump.
“What’s striking about this slide in Bitcoin is it comes as U.S. stocks and global equity indexes rest at or near record highs – the correlation between Bitcoin and mainstream equities is fraying,” said Antoni Trenchev, co-founder of crypto platform Nexo.
Bitcoin had a strong start to the year after the launch of exchange-traded funds in the U.S., propelling it to a record $73,803.25 in mid-March. However, it has since struggled.
“With an asset that has been rangebound for quite a while and recently in the lower end of that range, there are plenty of margined positions,” said Justin D’Anethan at digital assets market maker Keyrock.
“This of course creates a cascading effect, pushing prices further down than it might in a market with less leverage.”
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It’s disheartening to see Bitcoin taking such a significant hit, especially after its strong performance earlier this year. The potential release of tokens from Mt. Gox is understandably causing anxiety among traders, as it could flood the market with a substantial amount of Bitcoin. This kind of selling pressure from long-time creditors looking to cash in on their holdings at today’s prices is a major factor driving the downturn.
Additionally, the impact of leveraged positions cannot be overstated. The cascading effect from these positions being liquidated is a common scenario in volatile markets, exacerbating the price decline. It’s interesting to note the decoupling of Bitcoin from traditional equities, which are performing well while Bitcoin struggles. This divergence highlights the unique challenges and dynamics within the crypto space.
The political uncertainty adds another layer of complexity. The potential shift in the U.S. political landscape and its implications for crypto regulation are valid concerns for investors. With such a mix of factors, it’s no surprise that both Bitcoin and Ether are experiencing notable declines.
Despite these setbacks, it’s important to remember that the crypto market is known for its volatility. While these drops are significant, the underlying technology and the long-term potential of cryptocurrencies remain strong. For those who can weather the storm, there could be opportunities on the horizon as the market stabilizes.