Mt.Gox selling pressure alleviated, analysts say the risk of further decline is limited

Author: Mary Liu, BitpushNews

On Tuesday, the selling sentiment among traders eased, leading to a comprehensive rebound in the cryptocurrency market.

After hitting a low of $58,433 on Monday evening, Bitcoin rebounded to over $61,000 in the early hours of Tuesday, and during the midday session, it rose above the support level of $62,000. As of the time of writing, the trading price of BTC is $62,086, with a 24-hour increase of 3.4%.

Altcoins benefited from Bitcoin's recovery, with all but 8 of the top 200 tokens by market capitalization seeing gains.

The biggest gainer was Brett (BRETT), which rose 26% to a trading price of $0.1672, followed by dog wif hat (WIF), up 23.8%, and Dog (DOG), up 22.1%. The largest decline was seen in Lido DAO (LIDO), which fell 1.9%, followed by Tellor (TRB) down 1.8%, and Curve DAO Token (CRV) down 1.2%.

The current total market capitalization of cryptocurrencies is $2.29 trillion, with Bitcoin's market share at 53.5%.

Recent Weakness Origins

While many believe that potential selling pressure from Mt. Gox is the reason for the market pullback, some analysts point out that Mt. Gox's impact on the market is not significant. Instead, several analysts suggest that the cryptocurrency market is merely experiencing a typical post-halving consolidation, compounded by the common "summer lull" situation.

ETC Group analysts analyzed the recent weakness in cryptocurrencies, noting that multiple factors have influenced market sentiment, including a decrease in funds flowing into mainstream coins, increased selling pressure from Bitcoin whales and miners, along with rising macro risks.

Data from Bitpush shows that Bitcoin has fallen over 20% from its historical high in March, while other altcoins have suffered even more severe blows, with the global altcoin market cap, excluding Ethereum, averaging a 32.6% drop from recent highs. Overall, the inflow of funds into crypto assets has significantly slowed compared to levels seen after the U.S. introduced spot Bitcoin ETFs.

The slowdown in fund inflows into Bitcoin and crypto ETFs has put pressure on the market, with multiple analysts believing that positive fund inflows are the main source of price increases in the first quarter of 2024.

ETC Group analysts stated: "The on-chain inflow of major crypto assets like Bitcoin and Ethereum has dropped from about $100 billion per month in March to only $20 billion per month since April, which aligns with the current pause in the bull market and is one of the reasons the market has failed to reach new historical highs again."

Data released by CryptoQuant shows that over the past six weeks, 103,000 Bitcoins have been added to over-the-counter (OTC) wallets, with the increase in OTC wallet balances and price declines indicating that these sell orders have yet to find buyers.

Lucas Kiely, Chief Investment Officer of Yield App, stated in a report: "BTC and the broader cryptocurrency market are currently proving that the old adage 'Sell in May and go away' still applies, as prices remain sluggish. Additionally, macro factors have been, and may continue to be, the biggest drivers of Bitcoin price movements."

Kiely noted, "U.S. inflation is slowing but still well above the Federal Reserve's 2% target, which means that, despite this being an election year, the Fed may delay rate cuts until inflation is fully under control. Both traditional and digital asset markets are not interested in this—and have already shown it."

Regarding the upcoming approval of the ETH ETF, Kiely stated: "Market enthusiasm is low; Ethereum does not receive as much demand and attention as Bitcoin. The approval of an ETF or ETH investment fund may not only fail to drive up ETH prices but could also become a hindrance that increases downward pressure."

Analysts warn that "the ongoing downward revision of global economic growth expectations, coupled with rising recession risks in the U.S., may continue to pose challenges for Bitcoin and other crypto assets in the short term. It is also noteworthy that changes in global growth expectations have been the primary macroeconomic driver in recent months, accounting for over 80% of Bitcoin's performance volatility over the past six months."

"When others are greedy, I am fearful; when others are fearful, I am greedy"

However, ETC Group analysts suggest that the recent price drop may have shocked traders who are less confident in the long-term prospects of Bitcoin and the cryptocurrency market, and that prices may have already bottomed out.

They pointed out: "The wisdom of Wall Street suggests that ordinary retail investors are most bullish at market tops and most bearish at market bottoms. Theoretically, excessive bullish sentiment indicates a market peak, while excessive bearish sentiment indicates a market bottom. In fact, similar behavioral characteristics can also be observed in the crypto asset market."

Analysts stated: "We believe that multiple indicators have shown an imbalance in positions, with market sentiment being bearish, and that 'weak hands' have largely exited the market. Considering all these indicators, we believe that the short-term risk/reward has become increasingly asymmetric, with further downside risk relatively limited. Therefore, we see the current market crash as a good opportunity to increase investments in Bitcoin and crypto assets before significant events occur in the coming months."