BTC has fallen about 10% in the past two days, with panic sentiment reaching a nearly one-year low. Where is the market bottom?

Author: flowie, Nianqing, ChainCatcher

Editor: Marco, ChainCatcher

The massive compensation in Mentougou and the German government's reduction of BTC holdings, among other factors, have caused the crypto market to plunge.

Today at noon, BTC briefly fell below $54,000 (currently reported at $54,300), hitting a low of around $53,200, marking a new low since February 26 of this year, with a maximum drop of over 10% in 24 hours. BTC has also dropped about 10% in two days.

The entire altcoin market is also experiencing a major disaster. ETH dropped to a low of $2,806, with a 24-hour decline of over 8%; SOL fell to a low of $120.65, with a 24-hour drop of over 5%.

The relatively strong PEPE and TON have also seen significant declines. The 24-hour drop for PEPE and TON exceeded 15% and 7%, respectively.

The psychological defense line of the bulls is once again being challenged. Coinglass data shows that over $660 million in liquidations occurred across the network in 24 hours, primarily affecting long positions, with liquidation amounts reaching $565 million, including over $212 million in BTC and over $167 million in ETH. The total open interest in Bitcoin contracts has been continuously declining, with a drop of over 10% in the past 24 hours.

The fear sentiment in the cryptocurrency market has reached a near one-year low. According to Alternative data, today's cryptocurrency fear and greed index is at 29 (down from 44 yesterday).

Five Major Factors Behind the Plunge

Josh Gilbert, a market analyst at the crypto financial platform eToro, stated in a public interview that most of the sell-off can be attributed to concerns over the repayment to Mt. Gox creditors.

Mt. Gox plans to distribute 140,000 BTC in compensation to the exchange's creditors, accounting for 0.68% of the total Bitcoin supply. Today, this massive compensation has begun to be repaid.

According to Arkham data, in the last few hours, Mt. Gox has transferred over 50,000 BTC, and several creditors in Japan have reported to the media that they have received BTC/BCH repayments from Mt. Gox, with funds entering Bitbank or Kraken exchange accounts. This portion of creditors may have the potential for large-scale sell-offs.

In addition to the panic caused by Mt. Gox, Willy Chuang, COO of the crypto trading platform WOO X, stated that the German government's sale of Bitcoin and other factors have exacerbated these concerns.

Germany is one of the countries with the most BTC holdings globally. At the beginning of this year, 50,000 Bitcoins seized by German police began to be sold off in early June. According to Arkham monitoring, the number of Bitcoins held by the German government has decreased from 50,000 to around 40,000 in two weeks. In addition to Germany, the U.S. government wallet address has also shown unusual activity, transferring 237 BTC (approximately $13.67 million) yesterday, and the potential sell-off by the U.S. government is also affecting market sentiment.

Moreover, some crypto analysts have stated that large-scale long liquidations, potential sell-offs by BTC miners, and outflows from U.S. spot Bitcoin ETFs are also significant factors behind the decline.

Coinglass data shows that the value of BTC liquidated in the past 48 hours has exceeded $200 million, marking the most severe liquidation since April 13. Such liquidations typically trigger a chain reaction, leading to forced sell-offs and further price declines.

The economic pressure on miners has forced them to shut down equipment and sell BTC. Researchers at CryptoQuant revealed that indicators of miners in distress include a significant drop in hash rate by 7.7% and mining revenue per hash plummeting to near historical lows.

Bitcoin ETFs have seen net outflows for two consecutive days, with total outflows reaching $34.2 million, contributing to the decline in the crypto market to some extent.

Has the Market Not Yet Reached the Bottom?

Multiple analysts believe that despite today's significant drop, selling pressure will continue, and prices will further decline. Most predict that BTC will drop to $50,000, or even below $50,000 to test the $40,000 level.

Josh Gilbert from eToro stated that approximately $8 billion worth of BTC will flow into the market starting this month, and Bitcoin's price trend is expected to worsen in the coming days. Currently, negative news far outweighs positive news, and selling pressure will persist. Prices are likely to remain weak in the short term until a catalyst emerges to drive prices up.

Pav Hundal, an analyst at Swyftx, stated that the worst of Bitcoin's price trend may not have arrived yet. The massive downward trend in Bitcoin is about to impact an already indifferent market. The long-term macro environment remains favorable, but in the short term, we may test $50,000 or even lower. Currently, $52,000 is a key position between bear and bull markets.

Rachel Lin, CEO and co-founder of SynFutures, stated that selling pressure is unlikely to ease in the coming days. Although the market expects most Mt. Gox users to sell their tokens, if the selling volume is lower than expected, a rebound may occur. On the other hand, if there is enough selling to push prices down, we may see the $50,000 level.

Andrew Kang, co-founder and partner of Mechanism Capital, even believes that his initial estimate of a $50,000 bottom is too conservative and that we may see a more extreme correction to the $40,000 range. His reasoning is that the current market is similar to the range in May 2021, when Bitcoin and altcoins also experienced a parabolic rise. Currently, over $50 billion in crypto leverage is also close to historical highs (excluding CME), but the range duration is longer (18 weeks vs. 13 weeks), and there has not yet been extreme liquidation, which was experienced several times during the bull market from 2020 to 2021. He also predicts that the correction may last for several months before reversing.

Additionally, 10x Research also believes that Bitcoin could further drop to $50,000, as data from early June has already indicated that the timing for a correction in an overbought market has matured.

Nathan, co-founder of 7UP DAO, believes that BTC has no chance of dropping to $50,000 this week and even actively challenged Andrew Kang and 10x Research to a bet of 1 BTC. In response to Andrew Kang's viewpoint, he argued that today's market is very different from the past few years. With the launch of Bitcoin ETFs, the sentiment in U.S. stocks is influencing BTC's trend. Unless there is a significant change in macroeconomic data, what we are seeing is net inflows into ETFs, which will hedge against selling pressure. The potential impact of the Mt. Gox incident on BTC is only about 10%. If the macro market remains stable, subsequent ETF buying will easily absorb this, which is not enough to drive BTC into a significant decline.

Furthermore, he predicts that "the time left for the bears is running out," as the unemployment rate data and non-farm payroll data to be released tonight will favor U.S. stock bulls. Based on the performance of the past five years after Independence Day, all trends have been bullish, and the market will become clearer after the data is released.

NDV partner @Jhy256.BT stated that he remains bullish on the crypto market, expecting BTC to reach $100,000 by the end of the year. Currently, the selling pressure in the market is all foreseeable, including government-seized Bitcoins, the bankruptcy liquidation of MTGox, and the bankruptcy liquidation of FTX, all of which are being gradually digested. Additionally, foreseeable buying includes that the assets under management (AUM) of BTC ETFs account for less than 0.1% of the total allocation of the 10 institutions qualified for ETFs, and it should reach 1% to be the first milestone. Previously, the buying that accounted for less than 0.1% pushed Bitcoin from $40,000 to $73,000, and if another 10 times the funds flow in, a Bitcoin price of $100,000 is not difficult to achieve.