(Bloomberg) — Bitcoin is again under pressure due to concerns about possible sales of the token by creditors of the failed exchange Mt. Gox, a pullback that fuels doubts about the remaining momentum in a cryptocurrency bull run that began last year.
Bloomberg’s Most Read
The biggest digital asset fell as much as 5.2% on Monday before paring some of the swing to trade at $55,800 at 8:30 a.m. in London, about $18,000 below its March record. Smaller tokens like Ether and XRP have also struggled.
Tokyo-based Gox, which went bankrupt a decade ago after being hacked, is returning about $8 billion worth of Bitcoin to creditors in stages, raising concerns about a potential supply wall hitting the market.
Sentiment was also hurt by signs of German government divestments of seized Bitcoins, as well as decreased flows into dedicated US exchange-traded funds. Skepticism is growing over digital asset faithful’s predictions 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% decline in the token from its historic peak in the first quarter.
Technical Test
Speculators are scouring the charts for patterns that could signal the end of Bitcoin’s decline. Tony Sycamore, 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 unfavorable drop. If the pullback lasts until Sunday, the token will record five consecutive weeks of declines, the longest losing streak since the 2022 digital asset bear market. There is a risk of a “sharp drop” in prices until the Federal Reserve begins to loosen monetary policy, said Stefan von Haenisch, head of trading at OSL SG Pte.
Not so exceptional
At the beginning of 2024, Bitcoin’s year-to-date gain reached close to 70%, far above traditional assets such as stocks. Now, the tech-heavy Nasdaq 100 index is closer to overtaking the falling token. Selling typically punctuates Bitcoin bull markets and the long-term outlook remains positive, said Khushboo Khullar, venture partner at Lightning Ventures, which invests in Bitcoin-linked companies.
Spot-ETF Flows
Surprisingly strong demand for the first US Bitcoin ETFs fueled the digital asset’s record rise earlier this year. Since then, inflows have moderated and one question is whether the current weakness will spook ETF investors. But at least on Friday, they appeared to buy the dip, recording the strongest net inflow in about a month.
The Mt Gox dispersion is unlikely to lead to mass selling by lenders, but the longer Bitcoin spends below $60,000, the greater the chances of a further price correction, said Hayden Hughes, head of crypto investing. from the Evergreen Growth family office in Singapore.
Betting Options
The options market suggests that some investors see Bitcoin’s decline as temporary: The largest concentration of bullish bets is around a $100,000 strike price, according to data from Deribit. This may reflect expectations of more flexible monetary settings from the Fed in the coming months and the momentum behind Donald Trump’s pro-cryptocurrency bid to become US president again.
Caroline Mauron, co-founder of digital asset derivatives liquidity provider Orbit Markets, expects crypto to follow the lead of global markets ahead of Fed Chair Jerome Powell’s testimony and US inflation data due this week and can influence projections for monetary policy.
Bloomberg Businessweek Most Read
©2024 Bloomberg LP
