Bitcoin had a bad week, and that is an understatement. BTC declined in price for about 20% since last week. For five days in a row now, Bitcoin has slumped against the US Dollar. Since 2010, there have been 23 declines of more than 20%. This recent decline is the fifth most severe and the ninth longest, so it is no surprise that this has caused massive damage to investors’ sentiments over the past few months.
With many other factors affecting the cryptomarket as a whole, it is impossible to pinpoint an exact cause of market crashes. It is, however, possible to attribute declines to some identifiable circumstances. One contributing factor could be the liquidation of Mt. Gox assets, that had been happening in the past few months.
In the recent crashes, among the biggest sellers in Bitcoin is Mt. Gox. According to a Mt. Gox trustee, they sold $400 million in cryptocurrencies in the past few months of December to February. Despite already being defunct, Mt. Gox still has trustees that manage their remaining assets. In another report, the trustee said that on February 5, Mt. Gox sold 18,000 Bitcoin, which resulted to a drop of around 20% in USD price that day. This is relevant because the Mt. Gox trustee is still in possession of around $1.7 billion in Bitcoin, which accounts for almost 2 percent of the outstanding market capitalization. Add to this the approximately $200 million of Bitcoin cash also stashed by the trustee.
We can see that during this time of Mt. Gox’s supposed liquidation of assets, Bitcoin is being kept at horizontal trading levels, and massive dumps from Mt. Gox drops the price significantly, which was proven by the February 5 liquidation. Although this seems like negative news for Bitcoin traders, it actually is a good thing, since all of Mt. Gox’s dumps will now go to the hands of traders who are interested in the market. This can hopefully lead to a good rebound of prices and a healthy market recovery.
Again, the Mt. Gox liquidation is only one among many factors that are affecting the market. What’s clear today is that Bitcoin is currently sitting at a crucial level, deciding whether to go back up to bullish territory, or go for lower bottoms in the bearish territory. We will find out Bitcoin’s move in this week’s price action.
