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Bitcoin price decline continues over ‘true correction’ fears, what comes next?

Published 07/10/2024, 02:44 PM
© Reuters

Bitcoin price is on a downward trajectory. Over the past month, the cryptocurrency has dropped by 17%, hitting its lowest level since February 2024. Although there has been a slight rebound in the last five days with a gain of 1.33%, this minor uptick fails to offset the substantial fall seen in recent weeks.

To be sure, Bitcoin’s price fell to as low as $53,500 before buying interest rekindled, allowing it to reintegrate its former support around $56,500. Currently trading around $57,800, Bitcoin has dipped below the critical $60,000 mark. 

The pressing question, however, remains: will Bitcoin recover to its previous highs, or is it destined to fall further, potentially revisiting the lows of 2022 that wreaked havoc on the crypto market?

What led to Bitcoin’s recent decline? 

At present, two primary reasons have led to the decline of Bitcoin price. First is the potential initiation of the distribution of confiscated Bitcoin from the collapsed Tokyo crypto exchange, MT. Gox, which was once a prominent crypto platform, which crashed after most of its crypto assets were stolen by hackers between 2011 and 2014. 

The second factor impacting Bitcoin’s price is the large-scale sale of Bitcoin by the German government. For several weeks, Germany’s government has been liquidating significant amounts of Bitcoin, totaling hundreds of millions of dollars. 

The sell-off recently intensified, with approximately $75 million worth of Bitcoin being transferred to exchanges such as Coinbase (NASDAQ:COIN), Kraken, and Bitstamp. The sell-off was seen as a part of a broader strategy, with $315 million worth of Bitcoin sold since mid-June, bringing total sales to over $390 million in less than a month. 

Despite market concerns, these sales represent a small fraction of Germany's total holdings, leaving 40,359 Bitcoins still in reserve. Interestingly, the German government recently moved back 1,915 Bitcoins worth $111.5 million.

Market Reactions 

As Germany continues to liquidate its Bitcoin holdings, analysts see it as an opportunity to capitalize on the dip. The ongoing sales by the German government are being closely monitored, with analysts predicting short-term market volatility. The strategic implications of these actions, both for Germany's financial future and the broader cryptocurrency market, are a subject of significant debate.

Some suggest that Bitcoin’s recent performance could indicate a “summer lull,” a pattern observed in previous cycles. This analysis pointed out that the cryptocurrency’s future in Q4 depends on its ability to regain and maintain key price levels in the coming weeks.

Adding to the market’s unease is a noticeable decline in whale transactions, which have dropped significantly from 17,000 to below 12,000 in just one week. This decrease could signal waning interest from larger investors or a potential consolidation phase.

Prominent trader Peter Brandt has issued a bearish prediction, suggesting that Bitcoin could drop to $44,000. Brandt highlights that the current correction should concern investors, noting that Bitcoin has breached the 200 exponential moving average, a historically reliable support line.

This support breach raises the possibility of a more significant correction being underway.


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