Bitcoin Drops to $57k, Why is the BTC Price Down Today

Bitcoin, the largest cryptocurrency by trade volume, has taken a severe hit in its price over the last week. Consequently, the global crypto market has suffered a downtrend leading to a substantial loss in valuation. According to data from CoinMarketCap, the total crypto market cap has dropped by 4.80% to $2.13 trillion.

This sharp downturn has raised concern among investors about the future price trajectory. Riding on the wave of the spot Bitcoin ETF approval, Bitcoin shot to an all-time high of over $73k in March as large institutional funds flowed into the product. However, the price began to drop gradually and mostly traded above $60k. Fast forward to July 4, Bitcoin has fallen to a low of $57k for the first time since May 2 when it traded around $57,800.

Bitcoin Price Movement

Recent data from CryptoQuant clearly shows the patterns in Bitcoin movements. According to the data, during the price drop, about $2.4 billion worth of BTC, aged between 3 to 6 months has reportedly changed hands. This means that investors who opened positions earlier this year, especially after the Bitcoin ETF’s approval and the Bitcoin halving completion were cashing out their realized profits.

These set of investors must have entered the market on a short-term basis, after closing their positions following notable rallies. The data also shows that investors who have held their Bitcoins for over a year haven’t exhibited any major selling pattern, signifying long-term confidence in the value of the coin.

The key short-term implied volatilities for Bitcoin are up 10%, according to data from the options market, and the realized volatility, or DVol, is up 3%. Parameters about Ethereum have grown marginally less than those of Bitcoin, and skew indicators are unmistakably skewed downward. In all, Bitcoin still maintains a 53.3% dominance according to CoinMarketCap data. What could have caused the Bitcoin price to decline today, let us take a look.

Reasons Behind Bitcoin Price Fall

According to observations, several factors have contributed to the decline in the Bitcoin price today. One of the reasons for the fall can be attributed to increased government liquidation. Over the past month, the United States government and the German government have offloaded volume Bitcoins to several centralized crypto exchanges, presenting a possibility of a sell-off.

The German government in particular has actively been transferring seized Bitcoins to crypto exchanges and unknown wallets. On July 2, Coinfomania reported that the government moved $17.6 million in Bitcoins to Coinbase, Bitstamp, and Kraken. Before then the same government initiated a transfer of $94 million in BTC to the same exchanges. This series of transfers has sparked broader sell-offs among smaller investors who worry about the effect of this trend.

Another possible reason for the Bitcoin price decline is the anticipation of debt repayment by Mt. Gox. The defunct crypto exchange previously announced that it will begin repayment of its creditors in early July. On this note, the exchange initiated a test transfer today after it sent a mere $24 worth of Bitcoin to a wallet linked to Bitbank, one of the crypto exchanges that will help disburse the funds to clients, according to a report on 36crypto.

Mt. Gox said that it will repay its customers with Bitcoin and Bitcoin Cash. The implication of this might be a wider sell-off as repaid customers might look to dump their coins to cash in on realized profits. Recall that Mt. Gox collapsed in 2014 and at the time, Bitcoin was trading around $600 per coin.

At the time of writing, Bitcoin is selling at $58,261, representing a 3.46% decrease in the last 24 hours. Interestingly, amid the decline, the 24-hour trading volume has jumped by 47.2% to $40.2 billion.