The cryptocurrency market has seen negative price activity for the third consecutive day, reflecting a growing negative sentiment. The overall market value has dropped by $90 billion to $21.7 trillion, a 3.67% decrease in the past day. The market leader, Bitcoin, has dropped by 3.27% to $58,067.63 within 24 hours, following a 3.6% drop to $60,490 on July 1 due to selling pressure and actions by the German government.
The pressing question for everyone is whether Bitcoin has begun a long-term downward trend or is just facing a temporary setback.
In my opinion, there are many reasons for the current market downturn, including large withdrawals, liquidation, mining activities, government actions, and market sentiment indicators.
What are the causes of the sharp decline in the cryptocurrency market?
1. Massive capital outflows and whale movements
On July 3, another outflow of funds impacted BTC ETF. In the altcoin space, a cryptocurrency giant sold tokens worth millions of dollars, incurring significant losses. This entity or institution sold 3.13 million LDO tokens for $5.77 million, 49,771 AAVE tokens for $4.54 million, 269,177 UNI tokens for $2.41 million, and 250,969 FXS tokens for $708,000.
2. Mt. Gox token distribution
A major factor causing the decline in Bitcoin price is the imminent distribution of nearly $9 billion worth of Bitcoin by the now-defunct Mt. Gox exchange. In July, approximately 140,000 bitcoins will be distributed to creditors, raising concerns that these creditors may sell their substantial holdings of Bitcoin. Considering that the price of Bitcoin was around $600 when Mt. Gox collapsed, these creditors stand to make substantial profits, which could put pressure on the Bitcoin market.
3. Struggles of miners
Another reason is that Bitcoin miners have begun selling their holdings. Since Monday, they have sold over $150 million worth of Bitcoin on exchanges. Due to the Bitcoin halving event, miners' daily income has decreased from $79 million to $29 million, leading to selling pressure. To sustain operations, miners are forced to liquidate assets.
4. Government actions intensifying panic
The actions of the German government have intensified market panic. Recently, the government has been transferring Bitcoin, causing concern among investors who fear that this may impact the market, prompting them to sell their Bitcoin holdings preemptively, even though the government has not sold any Bitcoin yet.
Can the price of Bitcoin fall below $50,000? Is it a good time to buy on dips?
Overall market sentiment has turned bearish. Additionally, Bitcoin lost several key support levels in June, indicating a mid-term bearish trend. Will this bearish trend lead to a fall below the $56,000 level and test the psychological barrier of $50,000?
With the weekly relative strength index (RSI) approaching 50, the current focus is on maintaining support above $56,000. If bearish sentiment persists, Bitcoin may fall to around $50,000 before a possible rebound, signaling its resilience amid ongoing market turmoil will face a severe test.
On-chain data shows that both Bitcoin and altcoins have experienced massive sell-offs, dropping to near two-month lows. Despite the expected launch of a spot Ethereum ETF on July 15, the price of Ethereum has also fallen below $3,200. In my opinion, the current market conditions may present buying opportunities on dips. I recommend waiting for the initial market enthusiasm to fade and making new investments when market sentiment becomes skeptical and impatient.
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