[TL;DR]:

BTC has been falling recently, and many AltCoins have performed weakly, indicating that the overall market is under significant downward pressure.

The sudden big dump in the market is generally attributed to multiple factors such as the selling pressure caused by the Mt.Gox creditor compensation event, the German government's selling action on Bitcoin, and the selling pressure brought by the chain liquidation boost.

Although many Unfavourable Information have not been fully released, the analysis of various indicators suggests that the current selling pressure will be temporary, and the market will gradually recover from the current cold atmosphere.

Introduction

In recent days, the encryption market has been significantly volatile due to Mt.Gox's debt repayment and the sale by the German government, causing BTC to fall below $60,000 and briefly touch the shutdown price, while many altcoins have been generally hit hard, showing weakness.

This article will summarize the recent Fluctuation in the market for you and look forward to when the market will stop falling and turn upward.

The price of the currency has fallen, and the market's greed index has fallen to 29.

The cryptocurrency market is undergoing a significant downturn.

As a benchmark for the entire market, BTC's recent bearish trend in fundamental and technical aspects is particularly worthy of attention. After hitting a low of $53,454 on Friday (July 5th), BTC rebounded slightly on Saturday, briefly surpassing the $58,000 mark, showing signs of temporary recovery in the market. However, starting Sunday evening (July 7th), BTC once again encountered strong selling pressure, recording a weekly decline of over 16%.

However, this week, the market also performed weakly, and as of the time of writing, it is still hovering around $57,000, with a 3.31% increase in the past 24 hours, and the direction of the bull and bear is still unclear.

Figure 1 Source: Gate.io

At the same time, the sharp drop in BTC also led to a widespread decline in the encryption market, with the recent weekly decline of the Cryptocurrency with high Market Cap concentrated between 20% and 30%.

Taking Ethereum as an example, Ethereum has currently erased the gains brought by the Spot ETF Favourable Information, but with the expectation of the landing of the Spot ETF this week, it is expected to gain some support and may be the first to emerge from the downturn.

The current Crypto market's Plummet directly reflects the significant impact on market sentiment and investor confidence. According to Coinglass data, on the most intense Plummet day of July 5th, the total Get Liquidated amount of Crypto Assets exceeded 660 million USD, leading to the liquidation of nearly 240,000 investment accounts.

Figure 2 Source: Coinglass

In addition, market panic has escalated sharply, with the panic and greed index dropping to 29 on Saturday, July 6, the lowest since January 2023, reflecting market participants' extreme pessimism about future trends.

Pressure Test Brought by a Long Heavy Sell-off

The sudden big dump in the market is generally attributed to multiple factors such as the selling pressure caused by the Mt.Gox creditor compensation event, the German government's selling action on Bitcoin, and the selling pressure brought by the chain liquidation boost.

Let's first look at the Mt.Gox creditors' reimbursement event. Mt. Gox was once the largest BTC exchange in the world. In 2014, it was hacked and 850,000 BTC were stolen. Recently, Mt. Gox has finally started repaying creditors. It is expected to pay 142,000 BTC and 143,000 BCH in cash by October 2024.

This repayment plan is expected to trigger market panic, fearing that a large amount of BTC will be sold, leading to a price drop.

Figure 3 Source: ARKHAM

The German government began to transfer BTC on June 19th, but the market did not start to anticipate the dump until the end of that month. In fact, according to Lookonchain's monitoring, the German Federal Criminal Police Office may have transferred a large number of 12,366 confiscated BTC (worth about 7.088 billion US dollars) to various exchanges in batches since mid-June, and currently still holds 27,461 BTC (worth about 15.5 billion US dollars).

The US government also sold a batch of BTC seized in 2014, about 3940 BTC (about 2.4 billion US dollars) in late June. The US government still holds over 21K BTC, and the market pressure is equally significant.

Similarly, every big dump in the market is accompanied by liquidation of leveraged positions, and these cascading liquidations at high leverage further push prices lower. From the data perspective, the scale of long liquidations in recent times is the largest in the past year, and the squeeze on long leveraged positions is also quite significant.

As BTC prices continued to fall below the key thresholds of $60,000 and $57,000, the Long Position of the very long Whale was liquidated continuously. According to data from Coinglass, on Thursday and Friday last week, longers were liquidated with a total of 410 million and 330 million US dollars respectively, with long orders being significantly higher than short orders in terms of the proportion of Get Liquidated.

According to the latest data, if BTC falls to around $50,000, the estimated cumulative long order liquidation intensity will reach 690 million dollars, which is also the "Dali Sword" hanging over the long side.

Unfavourable Information release is not yet over, waiting for Favourable Information to be gradually realized

Although many observers believe that the current selling pressure will be temporary and the market will gradually recover from the current chilly atmosphere, many Unfavourable Information have not been fully released.

For example, according to the analysis of JPMorgan Chase analysts, the market's selling pressure on Bitcoin comes not only from the potential large-scale selling by Mt. Gox users, but also from profit-taking behavior by other investors, all of which exacerbate short-term price pressures, and it is expected that the price may rebound from August.

From the perspective of the development path of the entire industry, the market currently lacks sufficient favorable Bull Market driven themes, which objectively exacerbates market panic in a pessimistic atmosphere.

In the past year, the encryption market has long been lacking a landmark event similar to the 2020 Decentralized Finance trend, which can lead the trend and significantly promote the rise of wealth. In the past boom cycle, the surge in applications has brought unprecedented pressure to the public chain system, prompting funds to flow into more basic and critical infrastructure construction areas. However, this shift has not yet brought about an innovative breakthrough that can reach end users, and the lack of a clear, appealing development vision is widely felt by investors.

During this period, GameFi, AI technology, modular design, and public chain technology itself have successively become the focus of market follow, each showing unique charm and potential. However, unfortunately, these hot topics have not been able to coalesce into a core driving force sufficient to support the current market, and the market is still looking for the iconic event or storyline that can lead the next rise cycle.

In addition, the close to shutdown price of Mining Rig has also become a significant event in this decline. The selling actions of Mt.Gox and the German government are expected to continue for several months, bringing sustained pressure to the market. However, it is worth noting that the current BTC Mining difficulty has reached 79.50T, and only 5 Mining Rigs can remain profitable, falling below the shutdown price of mainstream Mining Rigs at $58,000.

Figure 4 Source: @f2pool_official

From the perspective of limited historical patterns, the shutdown price is the fundamental support for the BTC price. Once it falls to the shutdown price, it often means that the currency price will usher in a phase of bottoming out.

From the perspective of potential Favourable Information, the Federal Reserve's interest rate cut policy and political factors such as the U.S. presidential election will be long-term Favourable Information to promote market recovery. In particular, as the encryption industry's status rises in the game between politicians, positive signals such as the approval of Ethereum Spot ETF will further enhance market confidence.

In short, the BTC market is currently in a complex long-changing stage. Although there is uncertainty in the short term, especially with the shutdown price indicating strong support, the long-term impact of heavyweight sell-off events will continue for several months. However, from a long-term perspective, the encryption market still has great potential for rise.

Author: Carl Y.

This article represents only the author's point of view and does not constitute any trading advice.

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