Over the past 24 hours, the price of Bitcoin (BTC) fell as much as 4.8%, plummeting to a new low of $60,601 after trading above $64,000 a day earlier. This decline can be attributed to a combination of factors, including developments from the Mt. Gox saga, a significant liquidation of long positions and the continued capitulation of miners.
#1 Mt. Gox news shakes the market’s confidence
The sudden and steep drop from $62,900 to $60,601 in the price of Bitcoin closely coincided with a new announcement from the operators of the defunct Bitcoin exchange, Mt. Gox. This exchange, which was at the center of one of the first and largest Bitcoin thefts, stated that it would begin refunding victims in July 2024 using the stolen assets from a 2014 hack.
According to Nobuaki Kobayashi, the rehabilitation administrator, the refund process will include Bitcoin (BTC) and Bitcoin Cash (BCH) and will begin in early July. “The Rehabilitation Trustee has prepared to make refunds in Bitcoin and Bitcoin Cash under the Rehabilitation Plan […] The repayments will take place from the beginning of July 2024,” it said announcement is reading.
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This news was negatively received by the market, mainly due to fears of an oversupply from beneficiaries who would likely sell assets that have increased dramatically in value since their initial investment period before 2013. In May 2023, the trustee moved more than 140,000 BTC, terminating worth approximately $9 billion.
This transaction was significant because it was the first move of these funds in five years, which was closely watched by analysts and traders. The market reactions were immediate; Bitcoin prices fell as speculation about possible market flooding with these redeemed coins surfaced.
#2 Record liquidations of long positions
In addition to the downward pressure, there was also a notable increase in the liquidation of long positions in BTC. According to the latter facts Coinglass liquidated as much as $85.4 million in long positions. This event marks the largest liquidation since April 30 and May 1, when more than $195 million ($95 million and $100 million respectively) of longs were liquidated, correlating with a 12.5% price drop over those two days.
Such liquidations occur when the market price reaches the liquidation price of leveraged positions, triggering automatic sell-offs to cover losses, causing the price to fall further. This cascading effect contributes significantly to rapid price declines and increased market volatility.
#3 The continued capitulation of miners is adding to the selling pressure
The third critical factor affecting Bitcoin’s price is the continued capitulation of miners. Miner capitulation refers to a situation where miners, especially those operating with marginal efficiency, begin selling their mined BTC to cover operating costs due to unprofitability. This phase can put significant downward pressure on Bitcoin prices as it increases the supply of Bitcoin sold in the market.
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As reported by NewsBTC, renowned crypto analyst Willy Woo and others have pointed out that miner capitulation is a crucial phase to watch, especially after Bitcoin’s halving events that cut miner rewards in half, reducing their profitability comes under pressure. Woo recently noted that the recovery of such capitulations has historically been slow and closely tied to the revival of mining activity and hash rates.
Crypto expert Jelle, speaking via X, marked the continued nature of this capitulation today, saying: “Hash Ribbons show that the capitulation of miners is underway – exactly what you want to see after the halving. In general, the market starts to recover once the capitulation phase is over.”
At the time of writing, BTC was trading at $61,241.
Featured image from iStock, chart from TradingView.com