Bitcoin
Bitcoin’s Mt. Gox Swings Add to Signs of Shaky Crypto Recovery
(Bloomberg) — Bitcoin fell again on concerns about possible sales of the token by creditors of bankrupt exchange Mt. Gox, fueling doubts about the remaining momentum in the cryptocurrency rally that began last year.
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The largest digital asset fell as much as 5.2% on Monday to $54,313, about $19,000 below its March record high. Smaller tokens such as Solana and Cardano traded higher.
Tokyo-based Mt. Gox, which went bankrupt a decade ago after being hacked, is returning about $8 billion worth of Bitcoin to creditors in stages, highlighting the potential for a supply wall to enter the market. Some industry participants 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 of German government disposals of seized Bitcoin, as well as slowing inflows into dedicated U.S. exchange-traded funds. Skepticism is growing over predictions from digital asset faithful that the original cryptocurrency is still on track to hit $100,000.
The charts below analyze the outlook for Bitcoin following a more than 20% pullback in the token from its all-time high in Q1.
Technical test
Speculators are scouring charts for patterns that could signal an end to Bitcoin’s slide. Tony Sycamore, a market analyst at IG Australia Pty, flagged 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 an inauspicious drop. If the pullback lasts through Sunday, the token would post five straight weeks of declines, its longest losing streak since the 2022 digital asset bear market. There is a risk of a “sharp drop” in prices until the Federal Reserve starts easing 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 had reached nearly 70%, far outpacing traditional assets like stocks. Now, the tech-heavy Nasdaq 100 index is closer to matching the token. Sell-offs typically punctuate Bitcoin bull markets, and the long-term outlook remains positive, said Khushboo Khullar, a venture partner at Lightning Ventures, which invests in Bitcoin-linked companies.
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Spot ETF flows
Surprisingly strong demand for inaugural U.S. Bitcoin ETFs fueled the digital asset’s record-breaking surge earlier this year. Inflows have moderated since then, and one question is whether recent weakness will spook ETF investors. But on Friday at least, they appeared to buy the dip, posting the strongest net inflow in about a month.
The Mt. Gox collapse is unlikely to trigger a sell-off by creditors, but the longer Bitcoin remains 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 see Bitcoin’s dip as temporary: the largest concentration of bullish bets is around a $100,000 strike price, according to data from Deribit. This could reflect expectations of looser monetary settings from the Fed 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 cryptocurrencies to follow suit with global markets ahead of testimony from Fed Chairman Jerome Powell and U.S. inflation data, which are due out this week and could influence monetary policy projections.
–With the help of Olga Kharif.
(Updates with comments in fourth paragraph.)
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