Financial markets were expecting Bitcoin to hit $100,000 later this year, followed by other cryptocurrencies, but the market has gone against expectations.
Although Bitcoin has declined, and with it the market value of cryptocurrencies has fallen from $2.6 trillion in March to $2.1 trillion at the time of writing, this year has seen record numbers.
Earlier in March, the price of a Bitcoin unit broke the $71,000 barrier, the highest record price ever, up from $67.8,000, a record price that has remained in place since November 2021.
Last March, market expectations indicated that Bitcoin would reach $100,000 by the end of this year, amid a sharp increase in demand driven by an unprecedented new price boom.
But cryptocurrencies, led by Bitcoin, began a downward journey since last May, and the decline became more severe during the first week of July, to settle today at $56,000.
Last Friday, Bitcoin fell by 8% to about $54,000, its lowest level since last February.
German government
The German government’s transfers of Bitcoin to exchanges and Japanese company Mt. Gox’s plans to repay creditors played a major role in the decline.
Bitcoin’s price drop last week came on the back of the German government transferring $172 million worth of the currency to cryptocurrency exchanges.
On July 4, a crypto wallet linked to the German government transferred 1,300 bitcoins to Coinbase, Kraken, and Bitstamp in Luxembourg, which it had obtained in a court settlement.
This is the second transfer by the German government, while there was a first transfer of more than 3,700 Bitcoin units last June, which were units acquired from the operator of the movie piracy site “Movie2K”.
The German government’s sale of these units of Bitcoin indicates an increase in the global supply of the most prominent cryptocurrency, which contributes to automatically reducing its market value based on the theory of supply and demand.
The large volume of Bitcoin entering exchanges often indicates a potential sell-off, which has led to a decline in market confidence and pressure on the Bitcoin price to fall in recent days.
Mt Gox platform
Bitcoin’s price fell sharply on reports that Mt. Gox, which declared bankruptcy 10 years ago, was close to repaying its creditors with more than 140,000 bitcoins worth an estimated $8.5 billion.
This conversion means more potential sales, especially since customers’ purchases of the currency did not exceed $270 per unit, while today it is trading above $55,000.
Interestingly, these creditors have been waiting for repayment for over a decade, during which time the price of Bitcoin has risen by over $250 to nearly $55,000.
Sell long positions
Bitcoin’s decline since the beginning of this month has been further accelerated by massive liquidation of long positions (holding long and not selling) in the Bitcoin futures market.
This means that there are sales when the price of cryptocurrencies rises, in a corrective wave, while there are clients who need to make quick profits by selling.
Stock market
During the second quarter of this year, US stock indices and some European and Asian stocks rose, which led to selling in cryptocurrency markets and buying in stock markets.
Stock markets are rising on expectations that the US Federal Reserve will announce a cut in the federal funds rate later this year.
