Bitcoin’s plunge saw it fall below $55,000 as it dipped below its 200-day simple moving average.
The drop comes as Mt.Gox began repaying customers following a decades-long bankruptcy process that is expected to return about $9 billion in bitcoins.
The fresh influx comes as market watchers expect the German government to sell its bitcoin holdings, which will also weigh on markets.
So how bad will the downturn be?
That’s what the experts say.
David Brickell of FRNT
David Brickell, head of international distribution at FRNT, said DL news it is hard to say how deep Bitcoin will fall.
Still, he sees signs that the slump may be reversing.
Macro factors “are aligning positively, with the dollar moving lower and yields inversely lower on expectations of Fed rate cuts and improved liquidity as major central banks adopt easier policy,” Brickell said.
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Several factors suggest a turnaround.
“This latest flush could be enough to attract bearish buyers who have been sidelined, but remain bullish long-term and could fire the starting gun for the next part of the bull market,” Brickell said. “The bulls will be alert.
Rachel Lin of SynFutures
Rachel Lin, co-founder and CEO of decentralized crypto derivatives exchange SynFutures, said that bitcoin’s plunge is due to market expectations that users of Mt. Gox will dump its tokens,
But “we could see a bounce back if sales are lower than expected,” she said DL News.
Lin added that it’s possible that the price of bitcoin could fall further: “If there is enough selling to push the price down, we could be looking at the $50,000 level soon.”
Keyrock UK Brad Howell
Negativity over the impact of the potential $9 billion Mt. Gox market may just be sentiment.
That’s according to Brad Howell, CEO of crypto market maker Keyrock UK.
“We should put it in perspective,” Howell said DL news earlier this year.
Daily bitcoin trading volume averaged $30 billion in March, and the market handled $72 billion when bitcoin fell 8% on March 19, Howell said.
“That should give you an idea of the volume needed to move a market of this size,” he said.
Howell also said he doesn’t expect lenders to Mt. Gox will sell their assets because they are probably early adopters who are more likely to hold on to their bitcoins.
“Don’t expect huge volumes to be thrown out on the first day,” he said.
Kaiko’s Adam Morgan McCarthy
Adam Morgan McCarthy, an analyst at digital financial data firm Kaiko, said bitcoin’s liquidity this summer will play a big role in its price action.
“Liquidity tends to dry up in the summer months. We can already see that happening,” he said DL news.
“This means there is less support during selling pressure and prices can move more sharply. I expect that to continue throughout July, August and September.”
Jacob Joseph of CCData
CCData research analyst Jacob Joseph said DL news there is reason to be bullish, “despite current challenges”.
He cited the growing adoption of cryptocurrencies among institutional players — such as through spot bitcoin exchange-traded funds — and the U.S. election “served as positive catalysts” for the rally.
In the US, both President Joe Biden and potential Republican candidate Donald Trump have warmed to cryptocurrencies.
Joseph said he will watch for seasonal effects in the summer, which often lead to lower institutional trading activity.
It will also monitor key macroeconomic factors, including inflation rates, and the Federal Open Market Committee meeting later this month for further guidance.