Markets
Mt. Gox’s Bitcoin Fluctuations Add to Signs of a Rocky Cryptocurrency Rebound
(Bloomberg) — Bitcoin has slipped again on concerns about potential sales of the token by creditors of the bankrupt Mt. Gox exchange, fueling doubts about the remaining momentum in the cryptocurrency bull run that began last year.
Bloomberg’s most read articles
The largest digital asset fell 5.2% on Monday to $54,313, $19,000 below its March record. Smaller tokens such as Solana and Cardano gained.
Tokyo-based Mt. Gox, which went bankrupt a decade ago after being hacked, is returning about $8 billion worth of bitcoin to its creditors in stages, highlighting the risk of a market flood. Some industry players have said cryptocurrency market makers are not trying to minimize wild price swings.
“Momentum traders have taken over the market and market makers are not stepping in to balance the flows,” said Jeff Dorman, chief investment officer at Arca. “That’s why we’re seeing violent moves in both directions right now.”
Sentiment has also been hurt by signs that the German government is divesting seized bitcoins as well as diminishing flows into dedicated U.S. exchange-traded funds. Skepticism is growing over predictions from digital asset devotees that the original cryptocurrency is still on track to hit $100,000.
The charts below analyze the outlook for Bitcoin after the token declined more than 20% from its all-time high in the first quarter.
Technical test
Speculators are scanning the charts for patterns that could signal the end of Bitcoin’s slide. Tony Sycamore, a market analyst at IG Australia Pty, pointed to the 200-day moving average. A sustained rise above that mark would be an indication that Friday’s intraday low of around $53,600 was a “capitulation,” he wrote in a note.
Prolonged losses
Bitcoin stumbled on Monday with a dismal drop. If the pullback lasts through Sunday, the token would record five consecutive weeks of declines, the longest losing streak since the 2022 digital asset bear market. There is a risk of a “gradual decline” in prices until the Federal Reserve begins to ease monetary policy, said Stefan von Haenisch, head of trading at OSL SG Pte.
Not so exceptional
By early 2024, Bitcoin’s year-to-date gain was close to 70%, well above traditional assets like stocks. Today, the tech-heavy Nasdaq 100 index is closer to matching the token. Bitcoin bull markets are typically punctuated by selloffs, and the long-term outlook remains positive, said Khushboo Khullar, a venture partner at Lightning Ventures, which invests in Bitcoin-related companies.
The story continues
Spot-ETF Flow
Surprisingly strong demand for the first U.S. Bitcoin ETFs fueled the digital asset’s record-breaking surge earlier this year. Inflows have since moderated, and it’s questionable whether the recent weakness will scare off ETF investors. But on Friday at least, they appeared to buy the dip, recording the strongest net inflow in about a month.
The Mt. Gox selloff is unlikely to lead to a selloff by creditors, but the longer Bitcoin stays below $60,000, the greater the chances of a further price correction, said Hayden Hughes, head of cryptocurrency investments at family office Evergreen Growth in Singapore.
Betting Options
The options market suggests that some investors view Bitcoin’s decline as temporary: The highest concentration of bullish bets is around the $100,000 strike price, according to data from Deribit. This may reflect expectations of a Fed easing in the coming months and the momentum behind pro-crypto Donald Trump’s bid to become U.S. president again.
Caroline Mauron, co-founder of digital asset derivatives liquidity provider Orbit Markets, expects crypto to take a cue from global markets ahead of Fed Chair Jerome Powell’s testimony and U.S. inflation data, which are due this week and could influence monetary policy projections.
–With the assistance of Olga Kharif.
(Updated with comment in fourth paragraph.)
Bloomberg Businessweek’s Most Read Articles
©2024 Bloomberg LP