I believe everyone is ready to welcome the bull market of altcoins, but BTC has plummeted continuously, from 71K a few weeks ago to 54K now, a drop of 20%. In the past 24 hours, the entire network has liquidated 576 million US dollars, and long orders have liquidated 499 million US dollars. This situation has actually happened before, but it feels like it has not happened for a long time.

This article will collect the reasons for the sharp drop in Bitcoin, which can help us recognize the current situation and make our own judgments and strategies.

Reason 1: Japan's Mt.Gox exchange compensated users in the early days

Founded in 2010, Mt Gox was once the world's largest Bitcoin exchange, handling more than 70% of Bitcoin transactions in the early days. In early 2014, hackers attacked the exchange, resulting in the loss of about 740,000 Bitcoins (US$15 billion at current prices). This hacker attack was the largest of the many attacks on the exchange between 2010 and 2013.

The picture below shows the user seeking to recover the funds lost due to hackers.

The trustee has developed a repayment plan that has been in the works for several years and obtained an October 2024 deadline from a Tokyo court last year.

At the end of June, the defunct Bitcoin exchange Mt. Gox said it would begin distributing assets stolen from customers in a 2014 hack in the first week of July, after the deadline had been pushed back over the years.

In May, the exchange moved more than 140,000 BTC (worth about $9 billion) from a cold wallet to an unknown address in 13 transactions before formal compensation, the first on-chain wallet transfer in five years.

“The Compensation Trustee has been preparing to repay in Bitcoin and Bitcoin Cash under the Compensation Plan,” spokesman Nobuaki Kobayashi said in a statement posted on Mt. Gox’s website on Monday, June 24. “Repayments will begin in early July 2024, and due diligence and certain security measures will be required before payments are made.”

CoinGecko data shows that within minutes of Mt. Gox’s announcement, the price of Bitcoin fell from more than $62,300 in early Asian trading to below $62,100.

Most institutional traders said that Mt. Gox’s repayment of Bitcoin is likely to bring huge selling pressure to the Bitcoin (BTC) market to a large extent, and early investors will receive assets with much higher value than before 2013, making them more inclined to sell part of the returned assets.

Reason 2: German Government (BKA) wallet address dumps Bitcoin in large quantities

On June 19, a cryptocurrency wallet named "German Government (BKA)" appeared on the cryptocurrency chain analysis company Arkham and began to transfer Bitcoin, which aroused the curiosity of the community. The movement of the wallet led many people to believe that the German government was selling its BTC holdings. This wallet with the German government label has held 50,000 BTC since February and transferred 6,500 BTC on June 19.

According to Arkham data, the crypto wallet has held nearly 50,000 Bitcoins since February 2024, and then transferred nearly 6,500 BTC on June 19. The funds are said to have been seized from the pirated movie website operator Movie2k.

The German government-linked wallet made four transactions on June 19, one of which sent 6,500 BTC worth more than $425 million to the wallet address "bc1q0unygz3ddt8x0v33s6ztxkrnw0s0tl7zk4yxwd" and another sent 2,500 BTC worth $154 million to its own address.

The wallet address received 6,500 BTC and then transferred 2,500 BTC to another wallet address "bc1qq0l4jgg9rcm3puhhfwaz4c9t8hdee8hfz6738z". The wallet address then transferred the newly received funds in four 500 BTC transactions. Two of the transactions were transferred to cryptocurrency exchanges Kraken and Bitstamp, and the other two were transferred to unmarked private addresses.

The wallets flagged by the German government currently have 41,774 BTC left, worth $2.27 billion. While not all of the transferred funds have been liquidated, many crypto figures have commented on the potential impact of selling such a large amount of BTC.

It has to be mentioned that governments around the world sell seized BTC. Governments around the world often confiscate Bitcoin and other digital assets from criminals and occasionally hold auctions to sell confiscated cryptocurrency assets.

The US government has already sold a large amount of BTC from Silk Road. American businessman and Bitcoin advocate Tim Draper bought Silk Road BTC at an auction organized in the United States in 2014.

Today, the German government (BKA) sells Bitcoin every ten minutes, causing the price of Bitcoin to drop from around 60K to around 54K. Currently, there are 40KBTC left in the wallet, and I don’t know what the next plan is.

Reason 3: BTCETF

Spot BTCETF makes the price of cryptocurrencies more dependent on the sentiment of super investors. Currently, BTCETF holds 5% of the total supply of Bitcoin. Earlier this month, ETFs saw outflows again, and these changes have more or less put pressure on the price of BTC.

Reason 4: Miners are selling Bitcoin

On April 20, 2024, Bitcoin ushered in its most important day - halving, which reduced miners' profits from 6.25 to 3.125 BTC per Block.

For miners, they hope that the price of Bitcoin will rise. However, the price of Bitcoin is falling, forcing miners to sell their Bitcoin. As shown in the figure below, you can see that after April 20, the income has been reduced by nearly half.

Reason 5: US interest rate cuts

The lower the interest rate, the more attractive high-risk investments, such as Bitcoin. The minutes of the Federal Reserve meeting showed that policymakers were reluctant to lower interest rates unless there was more data showing that inflation was moving closer to the target rate of 2%.

Based on the above reasons, the Bitcoin market has been hit hard. When and to what extent it will recover will be a critical period.

Disclaimer:

This article is purely an industry information report, not an investment advice, sale or recruitment.

The crypto market is volatile and any information released has a strict short-term validity.

Please abide by local laws and regulations, do your own research, and be responsible for your own actions and decisions.

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