(Kitco News) – Cryptocurrencies faced heavy selling pressure on Monday after the trustee from the Mt. Gox bankruptcy estate announced that the distribution of Bitcoin (BTC) and Bitcoin Cash (BCH) to creditors would begin in July.
The threat of more than 100,000 Bitcoins being dumped on the market sparked the latest round of FUD headlines across new outlets, prompting many to exit to the safety of the sidelines until the fear dies down.
While newcomers to the crypto scene have interpreted Monday’s pullback as a sign of more downside to come, long-time BTC hodlers see it as a regular part of the Bitcoin bull market cycle and have urged those with less experience to keep the faith.
“In my view, Bitcoin's recent price decline is a healthy consolidation after significant price appreciation over the last 18 months,” said Sam Callahan, Senior Analyst at Swan Bitcoin, in a note shared with Kitco Crypto. “It's likely coming from long-term investors taking some profits and from unprofitable miners post-halving selling their treasury holdings.”
“Price corrections like these are par for the course in Bitcoin bull markets,” he added. “The impact on Bitcoin's price from Mt. Gox distributing Bitcoin is likely overblown. Creditors who wanted to sell their Bitcoin have now had more than 10 years to do so through selling their bankruptcy claims to more convicted, long-term investors. In addition, most creditors will likely hold their bitcoin because their cost basis is less than $700 per bitcoin.”
While Mt. Gox concerns were cited by many as the impetus of Monday’s sell-off, analysts at Secure Digital Markets said the weakness has been evident since the Federal Reserve took a more hawkish tone on interest rates, which has put pressure on all risk assets.
“Bitcoin's descent continued, hitting $60,000 on Monday after a low-volume weekend, as bearish market sentiment weighed heavily on price action,” the analysts said. “This decline traces back to the Federal Reserve's hawkish stance two weeks ago, where it adjusted its projected rate cuts for this year from three to just one.”
“Additionally, reports surfaced of miners and long-term holders liquidating near the recent highs around $70,000,” they added. “Bitcoin miner reserves have since plummeted to levels unseen since 2021, with a staggering 50,000 BTC recently sold off.”
Looking closer at Bitcoin’s price action, the analysts noted that King Crypto “is trading below its 20-day and 50-day moving averages, confirming a bearish trend.”
BTC/USD Chart by TradingView
“However, safe-haven assets like the U.S. dollar index and the 10-year Treasury yield have recently pulled back without signs of a rebound, which could support risk assets temporarily,” they added. “If these safe havens start to rise again, it will exert additional pressure on risk assets.”
“Technically, BTC is nearing the 200-day moving average at approximately $58,000, which is expected to act as near-term support, especially since the RSI indicates oversold conditions,” the analysts said. “A breach of this level could trigger a further decline, potentially driving prices down towards $45,000.”
Stocks climbed higher in early trading on Monday but faced pressures in the afternoon, which led to a mixed close, with the Dow gaining 0.74%, the Nasdaq losing 0.72%, and the S&P finishing flat.
At the time of writing, Bitcoin trades at $59,130, a decrease of 7.3% on the 24-hour chart.
Crypto market in a state of limbo
Analysts at Bitfinex said the crypto market is currently “in a state of limbo as we near higher timeframe range lows on the daily, weekly, and monthly charts, while there is also a downtrend in the lower timeframe (one-minute to 15 minute charts).”
They also cited outflows from U.S.-listed spot Bitcoin ETFs as “contributing to the negative sentiment, with outflows totalling $544.1 million last week, though this was linked to basis/funding arbitrage unwinding, rather than necessarily real sentiment on BTC.”
“As previously noted, large sell downs in ETFs often correlate with local bottoms in BTC prices,” they said. “As a consequence, total crypto market capitalisation has declined, with a pattern emerging that Thursdays and Fridays have become high volatility days.”
“The peak-to-trough decline during last Thursday and Friday was approximately five percent, which is considered quite significant for BTC,” they added. “Historically, movements of this magnitude have often signaled at least a local low, as seen on June 11th, when a similar intra-week drawdown resulted in the formation of a new local price floor. With this, there is potential for buying opportunities, and these significant drops are warranting close attention from traders.”
“However, we see the market as being in a wait and watch mode, with near-term scenarios either seeing continued pressure from BTC overhang sales and a lack of any catalyst to move higher; or a spark in sentiment with ETH ETF approvals coming through and sparking renewed positive sentiment, particularly in altcoins,” Bitfinex concluded.
And according to Brian Dixon, CEO of Off the Chain Capital, what is really needed from crypto investors is patience while this latest bout of weakness works itself out.
“Historically, even in the bull markets, bitcoin drops 20-30% 4-5 times a year, so, in my opinion, this correction is nothing to worry about,” Dixon said in a note shared with Kitco Crypto. “In the 2017 bull market, bitcoin dropped 20-30% over 10 times and still reached new all-time highs. In the 2020 – 2021 bull market, bitcoin dropped 20-30% 4 times and still reached new all-time highs.”
“Bitcoin is just as volatile as Amazon was back in 2000 when it dropped 80% several times and look at Amazon today,” he added. “The volatility, along with the performance, is a feature, not a bug. Bitcoin is going through a price discovery where the world is trying to discover what this technology is worth. Some people think it's worthless, and others think it is priceless. We will know in time what this technology is actually worth, but I believe it is priceless.”
Altcoins hammered
Altcoins followed Bitcoin’s lead lower on Monday, with most tokens in the top 200 recording losses.
Daily cryptocurrency market performance. Source: Coin360
Mog Coin (MOG) managed to rise above the noise to post a gain of 16.4%, followed by an increase of 8.2% for Lido DAO (LIDO) and a gain of 6.4% for UNUS SED LEO (LEO). ORDI (ORDI) was the biggest loser, falling 14%, while Echelon Prime (PRIME) lost 11.8%, and Uniswap declined by 11.7%.
The overall cryptocurrency market cap now stands at $2.21 trillion, and Bitcoin’s dominance rate is 53.4%.
