After two months, we see BTC back at the 5xxxx range. What happened in the market? Is there still hope for a bull market?

Original Title: 《Why is BTC dumping?》

Author: Gargoyle

Compiled by: Deep Tide TechFlow

Why is there a $BTC sell-off? This is the result of multiple factors, including the Mt. Gox incident, ETFs, halving, Germany, and more.

I have prepared a comprehensive analysis of the current situation.

In the past week, Bitcoin has dropped from $71,000 to $57,000, a decline of about 20%, which we haven't seen in a long time.

Today, let's explore why this is happening and what the future holds for BTC.

Mt. Gox

This cryptocurrency exchange collapsed in 2014 due to a hacking incident.

At the end of last month, it was reported that Mt. Gox is about to start repaying its creditors.

Representatives of the exchange plan to distribute 142,000 BTC (which accounts for 0.68% of the total Bitcoin supply) to customers.

Many are concerned that creditors may choose to sell the Bitcoin they receive. Given the amount of BTC they hold, this would certainly impact the market.

Moreover, just the worry of this possibility has already led many to start selling their assets.

But that's not all.

BTC ETF

Spot Bitcoin ETFs make cryptocurrency prices more dependent on the sentiments of large investors.

Currently, BTC ETFs hold 5% of the total Bitcoin supply.

At the beginning of this month, there was another outflow of funds from ETFs, which also put pressure on cryptocurrency prices.

Challenges Facing Miners

On April 20, 2024, Bitcoin will experience a halving event, reducing miners' rewards from 6.25 BTC per block to 3.125 BTC.

For miners to continue their work, an increase in Bitcoin prices is necessary, and many are hopeful for this.

However, prices have not risen as expected, and many miners are now forced to sell their BTC.

U.S. Interest Rates

The lower the interest rates, the more attractive high-risk investments (like cryptocurrencies) become.

The FRS (Federal Reserve System) meeting minutes show that policymakers are reluctant to lower interest rates unless more data shows inflation moving towards the 2% target rate.

Germany

The German government holds a large amount of Bitcoin and has begun to liquidate its assets.

According to Arkham data, the German government recently transferred 400 BTC to Bitstamp, Coinbase, and Kraken exchanges.

In the past two weeks, a total of 2,700 BTC has been transferred from the government's wallet to exchanges.

All these factors have contributed to the current market situation we are witnessing. However, there is always another side to the story, and there are also factors supporting Bitcoin's rise, which we will discuss in detail.

1. Major Investors Are Not Selling BTC

Despite the drop in Bitcoin prices, companies are not selling their assets. On the contrary, many companies have started buying BTC during the price decline.

Although there is a need to free up capital, the largest miner, Marathon Digital Holdings, has not disposed of its assets.

It is worth noting that miner capitulation may signal a trend reversal.

Statistics show that Bitcoin typically starts to rise about four months after a halving event.

If history repeats itself, bulls may drive out bears before the end of summer.

2. Community

According to Santiment data, more and more people on social media are calling for "buying the dip."

When Bitcoin prices fall below $60,000, it is considered particularly attractive.

The following chart shows statistics on calls to buy Bitcoin across various social networks.

3. Expectations of Fed Rate Cuts

Although most market participants are convinced that the Fed will not cut rates at the next meeting at the end of July, representatives have hinted that investors may see rate cuts later this year.

4. U.S. Elections

The crypto community in the U.S. is rapidly growing, and presidential candidates have not overlooked this topic.

After the recent debate, there is a belief that Donald Trump, who publicly commits to supporting the development of the crypto market, will become president.

If he wins, the head of the SEC may be someone favorable to cryptocurrencies.

Conclusion

I have analyzed the positive and negative factors of the current market. I do not wish to impose any views on you; you should conduct your own analysis and develop your own strategy.

Personally, I believe Bitcoin is a very good long-term investment (at least 4 years). I am not worried about the future of cryptocurrencies; I believe the market is in good shape.