When will the Market Bottom Out with Continuous Plummeting and Selling Pressure?
[TL；DR]:
Bitcoin has been continuously declining recently, and many Altcoins have shown weak performance, indicating that the overall market is under significant downward pressure.
For this sudden market crash, the market is generally attributed to multiple factors, such as the selling pressure caused by the Mt.Gox debt compensation incident, the German government’s selling action against Bitcoin, and the selling pressure boosted by a series of liquidations.
Although many bearish factors have not yet been fully released, analyzing various indicators suggests that the current selling pressure will be temporary, and the market will gradually recover from the cold atmosphere.
Introduction
Recently, the crypto market has experienced significant turbulence, with Bitcoin falling below $60,000 and hitting its shutdown price due to Mt.Gox’s debt repayment and the German government’s sell-off. Meanwhile, many Altcoins have suffered heavy damage and shown weak performance.
The article will help you understand the recent market fluctuations and anticipate when the market will stop falling and turn up.
Coin Prices have Generally Fallen, and the Market Greed Index has Fallen to 29
The crypto market is undergoing a significant downturn.
As a barometer of the entire market, Bitcoin’s recent bearish trend in fundamentals and technology is particularly noteworthy. After experiencing a low of $53,454 last Friday (July 5), Bitcoin rebounded slightly on Saturday and briefly broke through the $58,000 mark, indicating a brief rebound in the market. However, starting on Sunday evening (July 7), Bitcoin experienced strong selling pressure again, recording its largest weekly decline of over 16%.
This week, the market also performed weakly, with repeated struggles of around $57,000 as of the time of writing, and a rise of 3.31% in the past 24 hours. The direction of the long and short positions is still unclear.
Source: Gate.io
Meanwhile, Bitcoin’s sharp decline has also driven the entire crypto market to plummet, with cryptocurrencies with high market capitalization mostly experiencing weekly declines between 20% and 30% in recent weeks.
Taking Ethereum as an example, Ethereum has currently wiped out the gains brought by the positive spot ETF, but with the expected landing of spot ETFs this week receiving some support, it is expected to be the first to emerge from the downward haze.
The crypto market’s diving trend in this round directly reflects its significant impact on market sentiment and investor confidence. According to Coinglass data, on July 5, when the market experienced the most severe downturn, the total amount of cryptocurrency sold out across the network exceeded $660 million, and nearly 240,000 investment accounts were liquidated as a result.
Source: Coinglass
In addition, market panic has sharply intensified, with the panic and greed index dropping to 29 on Saturday (July 6), setting a new low since January 2023. This reflects the extreme pessimism of market participants towards future trends.
Stress Testing Caused by Multiple Heavyweight Sell-offs
For this sudden market crash, the market is generally attributed to multiple factors, such as the selling pressure caused by the Mt.Gox debt compensation incident, the German government’s selling action against Bitcoin, and the selling pressure boosted by a series of liquidations.
Firstly, let’s look at the Mt.Gox debt compensation event. Mt.Gox was once the world’s largest Bitcoin exchange, but in 2014, 850,000 Bitcoins were stolen due to hacker attacks. In the near future, Mr.Gox has finally begun to repay creditors and is expected to pay 142,000 Bitcoin and 143,000 Bitcoin Cash (BCH) by October 2024.
This repayment plan has triggered market panic, fearing that a large amount of Bitcoin will be sold off, leading to a price drop.
Source: ARKHAM
The German government began transferring Bitcoin as early as June 19, but the market only started to anticipate a crash at the end of that month. In fact, according to Lookonchain’s monitoring, the German Federal Criminal Police may have transferred a large number of 12,366 BTCs (approximately $708.8 million) seized in law enforcement actions to various exchanges in batches since mid-June, and currently holds 27,461 BTCs (approximately $1.55 billion).
The US government also sold a batch of Bitcoin seized in 2014 in late June, totaling approximately 3,940 BTCs (approximately $240 million). The US government still holds over 21K BTC, and market pressure cannot be underestimated.
Similarly, every market downturn is accompanied by a liquidation of leverage, and the consecutive liquidation of these high leverage factors has also contributed to further price declines. From a data perspective, the recent multi-order liquidation scale is the largest in the past year, and this time, the long-leverage squeeze is also quite significant.
As the price of Bitcoin continues to fall below the critical threshold of $60,000 and $57,000, many long positions of giant whales have been continuously liquidated. According to Coinglass data, on Thursday and Friday last week, the multi-party liquidation reached $410 million and $330 million, respectively, with a significantly higher proportion of long-position liquidation than short-position liquidation.
According to the latest data, if Bitcoin falls to around $50,000, it is expected that the cumulative clearing intensity of multiple orders is expected to reach $690 million, which is also the “Sword of the Dalix” hanging above the bulls.
The Bearish Release Has not Yet Ended, Waiting for the Positive to Gradually Materialize
Although many bearish factors have not yet been fully released, many observers believe from various perspectives that the current selling pressure will be temporary, and the market will gradually recover from the current cold atmosphere.
For example, according to analysts at JPMorgan Chase, the selling pressure on Bitcoin in the market is not only due to potential large-scale sales by Mt.Gox users, but also includes profit-taking behavior by other investors, all of which have intensified the short-term pressure on prices. It is expected that the coin price may rebound from August onwards.
From the development path of the entire industry, the current market still lacks sufficient favorable bull market driven themes, which objectively exacerbates market panic in a pessimistic atmosphere.
In the past year or so, the crypto market has been lacking a landmark event similar to the 2020 DeFi boom that can lead the trend and significantly drive wealth growth. In the past boom cycles, the explosive growth of applications has brought unprecedented pressure to the public chain , prompting funds to Flow toward more fundamental and critical infrastructure construction areas. However, the current transformation has also failed to bring about innovative explosive points that can reach end users, and investors generally feel a lack of a clear and attractive development vision.
During this period, diverse concepts such as GameFi, AI technology, modular design, and public chain technology have successfully become the focus of market attention, showcasing their unique charm and potential. Unfortunately, these hotspots have not been able to converge into a core driving force that can support the current market, and the market is still searching for the iconic event or storyline that can lead the next growth cycle.
In addition, the approaching shutdown price of mining machines has also become a significant event in this decline. The selling behavior of Mt. Gox and the German government is expected to continue for several months, bringing sustained pressure to the market. However, it is worth noting that the current mining difficulty of Bitcoin has reached 79.50T, and only five mining machines can maintain profitability, falling below the mainstream mining machine’s $58,000 shutdown price.
Source: @f2pool_official
From a limited historical perspective, the shutdown price is the fundamental basis supporting Bitcoin’s price. Once it falls to the shutdown price, the coin price will enter a temporary bottom.
From a potential positive perspective, the Federal Reserve’s interest rate cut policy and political factors such as the US presidential election will become long-term positive factors driving market recovery. Especially with the increasing position of the crypto industry in the game between politicians, positive signals such as the approval of Ethereum spot ETFs will further enhance market confidence.
In summary, the Bitcoin market is in a complex and ever-changing stage. Although it faces many uncertainties in the short term, especially the shutdown price indicating strong support, and the subsequent impact of multiple heavyweight selling and monetization events will continue for several months, the crypto market still has great growth potential in the long run.
