(Bloomberg) — Bitcoin has plunged again on concerns that creditors of the collapsed Mt. Gox cryptocurrency exchange may sell the token, raising doubts about whether momentum remains in the cryptocurrency bull market that began last year.
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The largest digital asset fell 5.2% on Monday, dropping about $19,000 from its March high to $54,313, while smaller tokens such as Solana and Cardano saw gains.
Tokyo-based Mt. Gox, which was hacked and bankrupted a decade ago, has been gradually returning about $8 billion worth of bitcoin to creditors, drawing attention to the possibility of a supply wall in the market.Some industry observers say cryptocurrency market makers are not trying to minimize big price fluctuations.
“Momentum traders are dominating the market and market makers aren’t stepping in to balance the flows,” said Jeff Dorman, chief investment officer at Arca Inc. “That’s why we’re seeing such strong moves in both directions right now.”
Signs that the German government will liquidate seized bitcoin and declining inflows into U.S.-based exchange-traded funds have also soured market sentiment, raising skepticism from digital asset believers that bitcoin will still hit $100,000.
The chart below breaks down Bitcoin’s outlook after the token fell more than 20% from its all-time high in Q1.
Technical Testing
Speculators are searching the charts for patterns that could signal an end to Bitcoin’s sell-off, and Tony Sycamore, a market analyst at IG Australia, has focused on the 200-day moving average. A sustained move above this level would signal that Friday’s intraday low of around $53,600 was “speculative,” he wrote in a note.
Long-term losses
Bitcoin began Monday with an ominous drop. If the decline continues into Sunday, it will mark the fifth consecutive week of decline for the token, the longest decline since the digital asset bear market of 2022. Stephan von Hoenisch, head of trading at OSL SG Pte, said there is a risk that prices will “continue to fall” until the Federal Reserve starts easing monetary policy.
Not so exceptional
At the start of 2024, bitcoin was up nearly 70% year to date, far outpacing traditional assets like stocks. The tech-heavy Nasdaq 100 Index is now roughly at par with the token. Khushboo Khullar, a venture partner at Lightning Ventures, which invests in bitcoin companies, said bitcoin bull markets are usually marked by sell-offs, but the long-term outlook remains bright.
Spot ETF Flows
Surprisingly strong demand for the first U.S.-listed Bitcoin ETF fueled the digital asset’s record rally earlier this year. Inflows have since subsided, and one question is whether the recent weakness will scare ETF investors away. But on Friday, at least, they appeared to be buying on the dip, posting the first net inflows in nearly a month.
While the dispersal of Mt. Gox’s assets is unlikely to lead to a wholesale sell-off by creditors, the longer bitcoin remains below $60,000, the more likely a further correction becomes, said Hayden Hughes, head of crypto investments at Singapore-based family office Evergreen Growth.
Option betting
The options market suggests some investors believe Bitcoin’s decline is temporary, with bullish bets most concentrated around the $100,000 strike price, according to Deribit data. This could reflect expectations of more Fed easing in the coming months and momentum for crypto-friendly Donald Trump to try to become US president again.
Caroline Moron, co-founder of digital asset derivatives liquidity provider Orbit Markets, expects cryptocurrencies to take their cues from global market movements this week, with Fed Chairman Jerome Powell’s testimony and U.S. inflation data likely to influence the outlook for monetary policy.
–With assistance from Olga Kharif.
(Updated comment in fourth paragraph.)
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