Bitcoin Price Faces Temporary Dip as Mt. Gox and German Government Sell-Off Looms

Key Takeaways:

• Potential 4-Week Correction: Bitcoin may experience a month-long price correction due to significant selling pressure from Mt. Gox repayments and the German government’s BTC liquidation.
• Mt. Gox Repayments Impact: The collapsed crypto exchange Mt. Gox will start repaying its creditors in July, potentially introducing $9.4 billion worth of Bitcoin into the crypto market.
• German Government BTC Sell-Off: A German government-labeled wallet moved nearly 6,500 BTC, contributing to the sell pressure. This wallet holds approximately 50,000 BTC, valued at over $3 billion.
• Analyst Predictions: Experts like Willy Woo and Rekt Capital anticipate further downside for Bitcoin, but suggest the correction is a temporary shakeout rather than a long-term decline.
• Recovery Outlook: The current market dip is attributed to large-scale selling by major holders rather than fundamental issues, suggesting that once the market absorbs this supply shock, Bitcoin’s recovery can resume.

Bitcoin price might be facing a potential dip below the $60,000 mark due to the combined selling pressure from Mt. Gox repayments and the German government’s sale of 50,000 BTC. However, this correction isn’t driven by fundamental weaknesses but by large-scale market movements from significant holders. Once this supply shock is absorbed, Bitcoin is expected to resume its upward trajectory.

BTC/USD | Source: TradingView

As is evident from the chart above, we can see how Bitcoin price has been closing in the red on the weekly timeframe for the past three weeks straight. Bitcoin price has lost over 12% in this timeframe.

Read More: Bitcoin Price Prediction

Bitcoin could see a 4-week correction: Analyst

Prominent Bitcoin analyst Willy Woo suggests that Bitcoin (BTC) might undergo a correction lasting up to four weeks before resuming its price rally. In a June 22 post to his 1.1 million followers, Woo stated:

Eyeballing this model… probably 1-4 weeks more of cooling down before #Bitcoin price action is sufficiently boring.

Chart: Intensity of speculators playing casino games. https://t.co/GC0NlFgT6W pic.twitter.com/B3bmD6C5vG

— Willy Woo (@woonomic) June 22, 2024

Woo’s analysis highlights a period of decreased speculative activity, which he believes will lead to a temporary price decline before a subsequent rally. He further elaborated that the reduction in speculative trading could precede a significant price pump once the market stabilizes.

Supporting Woo’s prediction, another respected crypto analyst, Rekt Capital, pointed to Bitcoin’s recent price action. In a June 17 report, Rekt Capital emphasized that a weekly close below a critical level could act as a new point of rejection for Bitcoin, indicating further downside pressure.

BTC Price to Test $60,000 Amid Mt. Gox Repayments

The impending sell-off from Mt. Gox, a collapsed crypto exchange, is set to introduce substantial selling pressure. On June 24, 2024 Mt. Gox announced it would begin repaying its defunct users in July. With more than $9.4 billion worth of Bitcoin owed to approximately 127,000 creditors, the influx of Bitcoin into the market could temporarily suppress prices.

Eric Balchunas, a senior ETF analyst at Bloomberg, noted the potential impact of these repayments, suggestingf it could negate the inflows seen in Bitcoin ETFs in one significant move. He remarked in a June 24 post:

“That’s like over half of all the ETF inflows being negated in one shot. Damn.”

In addition to Mt. Gox, the German government has also added to the selling pressure. On June 19, a wallet associated with the German government moved nearly 6,500 BTC, according to Arkham Intelligence. This wallet, which held almost 50,000 BTC since February 2024, is valued at over $3 billion at current Bitcoin price.

Market Correction Not Driven by Negative Fundamentals

Despite these sell-offs, it’s crucial to understand that this correction isn’t due to negative news or fundamental issues within the Bitcoin network. Instead, it’s the result of large holders selling their Bitcoin, leading to a temporary supply shock.

Pseudonymous crypto trader Jelle provided a more optimistic perspective, suggesting that this price movement could be a short-lived shakeout rather than a deep correction. Jelle pointed out that Bitcoin’s daily Relative Strength Index (RSI) hasn’t been this low in nearly a year, indicating potentially oversold conditions. The last time such conditions were observed, Bitcoin traded at $26,000.

The RSI is a widely used momentum indicator that measures whether an asset is oversold or overbought based on recent price changes. Jelle’s analysis hints at the possibility of a price rebound once the market absorbs the selling pressure.

Conclusion

The current correction in Bitcoin price, spurred by the Mt. Gox repayments and the German government’s Bitcoin sale, is likely a temporary event driven by significant market activity from large holders. This situation is expected to cause a brief supply shock, leading to a temporary dip in prices. However, once the market absorbs this influx, Bitcoin price is anticipated to stabilize and resume its upward trend.

In essence, while Bitcoin may face short-term challenges, the underlying fundamentals remain strong. The temporary correction should be viewed as an opportunity for the market to reset and for new investors to enter the space, potentially leading to a robust recovery and continued growth in the long term.

Source: CoinTelegraph