A massive sell-off engulfed Bitcoin price on Friday as news of the fallen Mt. Gox exchange kicking off payments to creditors reverberated in the market. Investors reacted by closing their open long positions, contributing to the surging liquidations.
This pressure spread to altcoins causing Ethereum to slide below $3,000, Solana under $135 as XRP plunged to $0.4.
As the sea of red characterized the cryptocurrency market, the cumulative market cap plummeted to $2 trillion. If the sell-off continues into the weekend, altcoins are likely to bleed the most, with Ethereum price retesting $2,500 support.
Bitcoin managed to temporarily prevent the downfall from continuing to $50,000, thanks to the support of $55,000. However, the daily candle wick extended to $53,545 on some exchanges.
By the time of publishing this analysis, BTC had bounced back to trade at $56,430. CoinGecko data still shows a 2.6% drop in 24 hours, amid a 38% increase in the trading volume to $55 billion.
Why Is Bitcoin Price Crashing?
The defunct exchange Mt. Gox recently announced that it will from July 5 start sending out payments to its creditors in Bitcoin and Bitcoin Cash. According to the statement from the Rehabilitation Trustee, the payments would be facilitated via select exchanges.
In a related report, Arkham a research firm, said that a “Mt.Gox wallet transferred 42.229k BTC approximately $2.71 billion, on July 5,” Chinese reporter Wu Blockchain wrote in a blog post.
Fear escalated among traders and investors following the statement from the Mt. Gox Rehabilitation Trustee. As sell-side pressure surged, BTC pushed on key support levels.
Meanwhile, selling activities surged further as the German government sold more Bitcoin. A report by Lookonchain on X outlined that together with the US government, Germany had since June 19 transferred 17,788 BTC worth around $1.08 billion to exchanges.
According to Lookonchain, the two governments “currently hold a total of 396,210 BTC ($22.78 billion).”
Investors should expect the volatility in the market to continue if these selling activities persist. The US alone holds 213,297 BTC, Germany 42,226 BTC, and Mt. Gox 141,687 BTC.
Since June 19, the #German Government, the #US Government, and #MtGox have transferred a total of 17,788 $BTC($1.08B).
In particular, the #German Government has transferred $BTC every day since July 1.
They hold 396,210 $BTC($22.78B) currently.
German Government, 41,226… pic.twitter.com/NZJvaQQ17Y
— Lookonchain (@lookonchain) July 5, 2024
Bitcoin Price Analysis: Recovery Incoming Or Burst?
With the sell-off likely to continue from a fundamental perspective, it is essential to turn to the asset’s technical structure. Based on the daily chart, the short-term trend is bearish and might persist to $42,000.
This follows the establishment and confirmation of a double-top pattern. Bitcoin breaching the neckline support at $58,222 coinciding with the 200-day Exponential Moving Average (EMA), validated the pattern.
CoinGape’s Bitcoin price prediction shows that traders would prefer to increase short positions below the 200-day EMA. A sell signal from the Moving Average Convergence Divergence (MACD) indicator backs the downtrend.
Moreover, a daily close below the 200-day EMA level would assert the sellers’ influence on Bitcoin price. In addition, the double-top pattern has a 22% breakdown target of $42,000.
Conversely, if traders increase buy orders at the current price level, support at $55,000 could serve as the springboard for a larger trend reversal above $60,000 over the weekend.
The post Bitcoin Price To Crash $42,000? Here’s What To Watch Out For appeared first on CoinGape.
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