Bitcoin set for worst week in over a year
1. Bitcoin was set for its biggest weekly fall in more than a year on Friday, as traders fretted over the likely dumping of tokens from defunct Japanese exchange Mt. Gox and further selling by leveraged players after the cryptocurrency’s strong run.
The cryptocurrency market experienced a significant downturn, with Bitcoin, the world's largest cryptocurrency, sliding as much as 8% to $53,523, its lowest since late February. This drop put Bitcoin on track for a more than 12% weekly decline, the largest since early November 2022. Similarly, Ether, a rival token, fell 9% to $2,841, reaching a two-month low.
Several factors contributed to this decline. Media reports indicated that Mt. Gox, once the leading exchange for cryptocurrencies before its collapse a decade ago, might start returning Bitcoin to creditors. Since these creditors acquired Bitcoin when it was valued at only a few hundred dollars in 2014, they are likely to sell, exerting downward pressure on the market. Tony Sycamore, a market analyst at IG, noted that the selling pressure is still related to creditor selling from the failed Mt. Gox exchange, with the market trying to pre-empt these creditor flows.
Analysts also pointed to concerns over political developments in the U.S., particularly the possibility of Joe Biden being replaced as the Democrats' presidential nominee by someone less favorable to cryptocurrencies, following a shaky debate performance against rival candidate Donald Trump.
Antoni Trenchev, co-founder of the crypto platform Nexo, highlighted the unusual nature of Bitcoin's decline, noting that it occurred while U.S. stocks and global equity indexes were at or near record highs. This indicates a fraying correlation between Bitcoin and mainstream equities.
Bitcoin had a strong start to the year, boosted by the launch of exchange-traded funds in the U.S., which propelled it to a record high of $73,803.25 in mid-March. However, it has since struggled. Justin D’Anethan from digital assets market maker Keyrock explained that the market's current state, characterized by a range-bound asset at the lower end of that range, has led to many margined positions. This has created a cascading effect, pushing prices further down than they might have in a less leveraged market.
