Bitcoin
Should You Be Catching a Falling Knife? By Investing.com
New developments in the crypto space led to a price correction on Friday, sending the leading cryptocurrency to a four-month low. BTC fell to $53,500 the day after news broke that defunct crypto exchange Mt. Gox had started making payments to creditors.
Additionally, the crypto asset has also come under pressure as German police transferred around $75 million worth of cryptocurrencies confiscated from a hacking website to exchanges and new data from the Federal Reserve minutes indicated that the central bank is not yet ready to cut interest rates.
Bitcoin later recovered and was trading near $55,700 at the time of writing.
Why is Bitcoin falling?
Friday’s Bitcoin price correction came as cryptocurrency investors’ attention turned to the nearly $9 billion payout to users of the now-defunct Mt. Gox exchange.
Nobuaki Kobayashi, the trustee managing the Mt. Gox bankruptcy estate, said that repayments in Bitcoin had begun to some creditors through several designated cryptocurrency exchanges. However, he did not specify the exact amounts transferred to those exchanges.
Kobayashi indicated that the remaining funds would be distributed once certain conditions were met, including the validation of registered accounts and the conclusion of discussions between the administrator and cryptocurrency exchanges.
He stressed that the process is aimed at ensuring that repayments are made “safely” and urged “creditors eligible for rehabilitation to wait a little”.
At its peak, Mt. Gox was the largest Bitcoin exchange, handling 70% of all global Bitcoin transactions. The exchange shut down in February 2014 following a massive hack, and its former CEO was later convicted in a Japanese court of tampering with records.
Despite having ceased operations a decade ago, the administrator has only recently begun issuing refunds to victims, with multiple delays stalling the rehabilitation process.
The payment process began last year, with many creditors confirming receipt of payments via bank transfer in Japanese yen.
Further contributing to Bitcoin’s price correction, the German government transferred another substantial portion of its Bitcoin reserves to exchanges after seizing funds from a piracy website, Movie2k.to.
According to blockchain data, Germany’s Federal Criminal Police Office (BKA) moved approximately $75 million worth of BTC across multiple transactions on July 4. These funds were distributed across exchanges such as Coinbase (NASDAQ:), Kraken, and Bitstamp.
This recent transfer follows the government moving around $315 million worth of Bitcoin to various platforms since mid-June. In total, Germany has offloaded over $390 million worth of Bitcoin in less than a month.
Furthermore, the recent release of the Federal Reserve’s June meeting minutes revealed policymakers’ reluctance to cut interest rates until new data indicate a sustainable move toward the central bank’s 2% inflation target.
Higher interest rates generally reduce investors’ appetite for riskier assets like Bitcoin and other cryptocurrencies.
Bitcoin hit an all-time high of over $73,700 in March this year after the Securities and Exchange Commission approved the first US spot Bitcoin exchange-traded fund (ETF).
Bitcoin Price Analysis
Bitcoin price has now retraced 27% from its recent high and is approaching the 38.2% Fibonacci retracement level. This is the first major block of support, which is located just below the $52,000 handle.
A break below this level would open the door for a deeper pullback, with the zone around $48,000 acting as the next strong support level. This horizontal support block has proven to be an important trading zone in the past.
On the upside, Bitcoin price would need to return to trading above $60,000 for the bearish momentum to fade and the bulls to regain control.