Bitcoin was set for its biggest weekly fall in over a year on Friday as traders worried about potential token dumping from the defunct Japanese exchange Mt. Gox and further selling by leveraged players after the cryptocurrency’s recent strong run. The price of Bitcoin, the world’s largest cryptocurrency, dropped as much as 8% in a day to $53,523, its lowest since late February. This marked a weekly decline of over 12%, the largest since early November 2022. Similarly, Ether, Bitcoin’s main rival, fell 9% to $2,841, reaching a two-month low.
Media reports indicated that Mt. Gox, once the leading cryptocurrency exchange before its collapse a decade ago, might start returning Bitcoin to its creditors. These creditors are seen as likely sellers since the value of Bitcoin was only in the hundreds of dollars when the exchange failed in 2014. Market analyst Tony Sycamore from IG stated, “The selling pressure is still related to creditor selling from the failed Mt Gox exchange. However, the acceleration to the downside suggests the market is trying to get ahead of the creditor flows.”
Analysts also noted concerns about political uncertainties in the U.S., with worries over the possibility of President Joe Biden being replaced as the Democrats’ presidential nominee by someone less pro-crypto following a shaky debate performance against rival candidate Donald Trump. Antoni Trenchev, co-founder of crypto platform Nexo, commented, “What’s striking about this slide in Bitcoin is it comes as U.S. stocks and global equity indexes rest at or near record highs – the correlation between Bitcoin and mainstream equities is fraying.”
Bitcoin had a robust start to the year, propelled by the launch of exchange-traded funds (ETFs) in the U.S., which pushed its price to a record high of $73,803.25 in mid-March. However, it has struggled to maintain those levels since then. Justin D’Anethan, from digital assets market maker Keyrock, explained, “With an asset that has been rangebound for quite a while and recently in the lower end of that range, there are plenty of margined positions. This of course creates a cascading effect, pushing prices further down than it might in a market with less leverage.”
The recent downturn highlights the volatility of the cryptocurrency market and the impact of external factors, such as regulatory concerns and market sentiment, on asset prices. As Bitcoin and other cryptocurrencies continue to navigate these challenges, market participants remain vigilant, anticipating potential shifts in market dynamics and preparing for further fluctuations in prices.
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