Wednesday, July 24, 2024

Bitcoin wobbles as Mt. Gox payouts loom, Fed uncertainty rises

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Bitcoin’s volatile performance continues as concerns mount over potential sales by creditors of the defunct Mt. Gox exchange. The largest digital asset fell by up to 5.2% before recovering slightly, now trading at $57,850—significantly below its March peak. The market remains wary of additional supply, German government sell-offs of seized Bitcoin, and reduced inflows into US Bitcoin ETFs. With Bitcoin’s prolonged dip, speculation grows about its ability to hit the $100,000 mark amid mixed technical signals and uncertain monetary policy from the Federal Reserve. Despite this, the options market indicates some optimism, with significant bullish bets on the cryptocurrency’s future.

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By Suvashree Ghosh and Sidhartha Shukla

Bitcoin skidded anew on concerns about possible sales of the token by creditors of the failed Mt. Gox exchange, fueling doubts about the remaining impetus in a crypto bull run that began last year.

The largest digital asset slid as much as 5.2% on Monday before reversing the wobble to trade up 1% at $57,850 as of 10:04 a.m. in London, some $16,000 below March’s record high. Smaller tokens such as Ether and XRP also erased losses and turned higher.

Tokyo-based Mt. Gox, which went bankrupt a decade ago after being hacked, is returning about $8 billion of Bitcoin to creditors in stages, spotlighting the potential for a wall of supply to come into the market.

Read more:  Trump woos Bitcoin miners, vows support amidst industry backlash

Sentiment has also been hampered by signs of German government disposals of seized Bitcoin as well as waning inflows into dedicated US exchange-traded funds. Skepticism is growing about predictions from the digital-asset faithful that the original cryptocurrency is still on course to reach $100,000.

The charts below analyze the outlook for Bitcoin following a more than 20% retreat in the token from its all-time peak in the first quarter.

Technical Test

Speculators are scouring charts for patterns that may signal an end to Bitcoin’s tumble. 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 about $53,600 was a “capitulation,” he wrote in note.

Prolonged Losses

Bitcoin stumbled into Monday with an inauspicious slide. If the retreat lasts through Sunday, the token would post five straight weeks of declines, the longest such losing run since the 2022 digital-asset bear market. There’s a risk of a “grind lower” in prices until the Federal Reserve begins loosening monetary policy, said Stefan von Haenisch, head of trading at OSL SG Pte.

Not So Exceptional

Earlier in 2024, Bitcoin’s year-to-date gain came close to 70%, far above traditional assets like stocks. Now the tech-heavy Nasdaq 100 index is closer to matching the token. Selloffs typically punctuate Bitcoin bull markets and the longer 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 inaugural US Bitcoin ETFs stoked the digital asset’s record-breaking ascent earlier this year. The inflows have since moderated, and one question is whether recent weakness will spook ETF investors. But on Friday, at least, they appeared to buy the dip, registering the strongest net inflow in about a month.

The Mt. Gox dispersal is unlikely to lead to mass selling by creditors but the longer Bitcoin spends below $60,000, the bigger the odds of a further price correction, said Hayden Hughes, head of crypto investments at family office Evergreen Growth in Singapore.

Options Wagers

The options market suggests some investors view the Bitcoin dip as temporary: the highest concentration of bullish wagers is around a strike price of $100,000, according to data from Deribit. This may reflect expectations of looser Fed monetary settings in coming months and the momentum behind pro-crypto Donald Trump’s bid to become US president again.

Caroline Mauron, co-founder of digital-asset derivatives liquidity provider Orbit Markets, expects crypto to take its cue from global markets ahead of testimony from Fed Chair Jerome Powell and US inflation data, which are due this week and may influence projections for monetary policy.

Read also:

  •  Bitcoin nears record high, sparking renewed financial frenzy
  • Retail traders remain on sidelines amid Bitcoin rally surge
  • Bitcoin slides 6% as investors pull out ahead of Fed decision

© 2024 Bloomberg L.P.

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