On the morning of July 4, the price of the leading cryptocurrency briefly fell below $58,000, a level last seen in February. Within an hour, prices dropped by 3.8% on increased volumes due to $69 million in liquidations, according to Coinglass.
As of 12:25 (Kyiv/Moscow), the price of the leading cryptocurrency had fallen below $57,000, with Ethereum dropping to $3130.
The volume of forcibly closed bitcoin positions reached its highest since June 24 ($177.4 million).
The downturn in sentiment also affected other top-10 cryptocurrencies by market capitalization.
On July 3, net outflows from spot bitcoin ETFs amounted to $20.45 million, following $13.6 million the previous day, according to SoSoValue. The negative trend continued for the second consecutive day.
Investors withdrew $27 million from Grayscale’s GBTC, while $6.55 million was added to Fidelity’s FBTC. Other products saw no changes.
Bloomberg noted bitcoin’s drop below the 183 DMA, historically a bearish signal indicating risks of further decline.
Likelihood of a Drop to $40,000
Andrew Kang of Mechanism Capital drew a parallel with bitcoin’s exit from a range in May 2021 following a parabolic rally. He believes there is now significant leverage (over $50 billion), the market has been range-bound for a long time, and has not faced large squeezes typical of events three years ago.
Most market participants are not appreciating the significance of a potential loss of a 4-month range on Bitcoin
The closest parallel we can draw is to that of the range of May 2021 where we also came off a parabolic rally of BTC and alts
$50B+ of crypto leverage here is… https://t.co/R3qAcCajAC pic.twitter.com/B4bpeoZwxo
— Andrew Kang (@Rewkang) July 3, 2024
“It is quite likely that initial estimates [of the correction] at $50,000 were too conservative, and we will see a more extreme pullback to $40,000. If realized, it would be quite destructive for the market. It may take several months of consolidation/downward momentum (a recovery period) before a return to an upward trend becomes possible,” the expert suggested.
Factors Behind the Decline
Bloomberg reminded of the phased compensation by the Mt.Gox trustee of 137,000 BTC to clients of the bankrupt platform, and traders’ concerns that some coins might hit the open market.
Nervousness is also caused by the distribution of digital gold by the authorities of the US and Germany. Additionally, the American elections could exert pressure on the price.
“The likelihood that a stronger Democratic candidate, who may not support cryptocurrencies, could replace [current President Joe] Biden is one of the factors [behind the decline],” commented Richard Galvin, co-founder of Digital Asset Capital Management.
Noelle Acheson, author of the Crypto Is Macro Now newsletter, reminded Bloomberg of the selling pressure from miners.
In an interview with The Block, Bit.com marketing director Toya Zhang reported large orders placed on OTC platforms.
“Due to a lack of liquidity in the market and the absence of new events in the cryptocurrency sector, it is difficult to see significant growth without a substantial advantage such as a reduction in interest rates“, she explained.
Standard Chartered has forecast a new ATH for bitcoin in August.
Earlier, CryptoQuant announced the completion of prerequisites for a rally resumption in the third quarter.