Bitcoin Reaches Lowest Level Since February Amid Persistent Sale Fears

Bitcoin's value has fallen to its lowest since February, dropping as much as 8.1% amidst fears of major sell-offs. The cryptocurrency's decline is influenced by several factors, including potential sales by failed exchange creditors, government authorities, and under-pressure miners. This comes despite a rising stock market, highlighting the unique challenges faced by the crypto sector.

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Bitcoin's Steep Decline

Bitcoin's price experienced a significant drop for the fourth consecutive day, decreasing by up to 8.1% to reach around $54,300 by mid-morning on Friday in London. This marks its lowest value since February. The cryptocurrency's decline contrasts with gains in the stock market, underscoring the distinct pressures on the digital asset market.

Factors Behind the Drop

Waning ETF Excitement

Bitcoin's price has decreased by approximately 25% since its peak in March. The initial enthusiasm surrounding US exchange-traded funds (ETFs) investing in Bitcoin has diminished, replaced by worries about sustained high-interest rates and political uncertainty.

Mt. Gox Bitcoin Distribution

Market pressure has been exacerbated by the administrators of the defunct Mt. Gox exchange, who are in the process of returning $8 billion worth of Bitcoin to creditors. The uncertainty over how much of this Bitcoin will be sold has further weighed on the market. Arkham Intelligence reported a movement of $2.7 billion worth of Bitcoin from a Mt. Gox-related wallet on Friday.

Potential Government Sales

Additionally, there are signs that German authorities might sell some of the 50,000 Bitcoin they confiscated from online criminals. This potential influx of Bitcoin into the market adds another layer of concern for investors.

Miner Sell-Offs Due to Profit Pressures

Bitcoin miners are also facing significant pressure to sell their holdings due to declining profitability. The energy-intensive process of mining has become less lucrative, especially after April's halving event, which reduced the number of new tokens miners receive for their efforts.

Impact on Miner Revenue

Daily revenue for Bitcoin miners has dropped by 75% to $26.5 million since the April halving, according to CryptoQuant data. Transaction fees earned by miners have also fallen to 3.7% of total revenue, down from a peak of 75% earlier in the month.

Market Correlations and Investor Sentiment

MSCI Inc.'s global stock index is near a record high, while the short-term, 30-day correlation between Bitcoin and the index is decreasing. This divergence raises questions about whether the risk aversion in the crypto market is an isolated phenomenon or if it signals a cautious quarter for mainstream investments following a robust first half for stocks.

Expert Insights

"There’s a general lack of excitement in crypto markets right now," said Stefan von Haenisch, head of trading at OSL SG Pte. "Most current news, such as the Mt. Gox sales, is negative."

Von Haenisch believes that the crypto market needs more positive signals from the Federal Reserve. "One or two rate cuts, along with an expansion of the Fed's balance sheet, are crucial for the crypto market," he suggested.

Looking Ahead

Investors are awaiting US jobs data later on Friday for clues on the Federal Reserve's future policies. Recent weak economic reports have strengthened the case for the US central bank to ease monetary settings in the coming months.

Bitcoin reached an all-time high of $73,798 in March, driven by strong demand for initial US ETFs for the token. However, these inflows have since decreased, dragging Bitcoin down and affecting the broader digital asset market.

Liquidations and Market Stability

Recent Liquidations

Over the past three days, more than $800 million worth of optimistic crypto positions were liquidated, one of the heaviest such events since April, according to Coinglass data. "Poor weekend liquidity will amplify any moves triggered by liquidations, even small ones," said Caroline Mauron, co-founder of Orbit Markets, a digital asset derivatives liquidity provider.

Stabilizing Factors

She added that the return of US investors from the July 4 holiday should help stabilize the market. As Bitcoin miners continue to cope with the financial impact of the April halving event, some are opting to sell portions of their Bitcoin inventory to maintain profitability.

"The $51,000-$52,000 range is critical as many Bitcoin miners are approaching their break-even point for profitable mining," said Le Shi, head of trading at Auros, a market-making and algorithmic trading firm.

Also Read: 4 Bitcoin Stocks to Strengthen Your Portfolio Before the Next Surge