bitcoin risks
July 8, 2024, 4:50 a.m.

Bitcoin Risks Crash To $40K Due to Mt. Gox Supply Blast

Bitcoin's value may face a significant decline to $40,000 due to the market's potential inability to absorb a substantial influx of BTC from Mt. Gox creditors. Currently, Bitcoin traders are withdrawing approximately 22,350 BTC daily, which is significantly lower than the impending release of 140,000 BTC from Mt. Gox.

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Market Strain from Mt. Gox BTC Release

An on-chain analyst verified by CryptoQuant, Papi, has projected a bearish outlook for Bitcoin, citing concerns over the market's capacity to handle the sudden supply increase. Bitcoin's net flows, calculated by subtracting outflows from inflows across all exchanges, indicate an average positive net flow of 150 BTC entering exchanges daily. Concurrently, the median amount of Bitcoin leaving exchanges daily stands at around 22,360 BTC, suggesting ongoing buying activity.

In stark contrast, the Mt. Gox trustee has already dispatched over 47,000 BTC out of the total 140,000 BTC earmarked for release. Given the implied buying activity of 22,350 BTC daily, Papi argues that the market lacks sufficient capacity to absorb the potential influx from Mt. Gox creditors.

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Potential for Market Stabilization Amid Mt. Gox BTC Release

Despite these concerns, the market may avoid a significant downturn to $40,000 if demand for Bitcoin increases in response to macroeconomic factors. For example, recent U.S. jobs data has bolstered expectations of a potential interest rate cut in September, with bets increasing to 76% compared to around 45% a month ago. This could potentially enhance demand for riskier assets like Bitcoin.

This improved risk sentiment is reflected in the resumption of inflows into U.S.-based Spot Bitcoin exchange-traded funds. On July 5, coinciding with the release of the U.S. jobs data, these ETFs attracted $141.1 million worth of BTC, signaling an improved market sentiment.

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Technical Challenges for Bitcoin Recovery

From a technical standpoint, Bitcoin must reclaim its 200-day exponential moving average (EMA) at $58,200 to strengthen its bullish prospects for the remainder of the third quarter of 2024. As of July 7, Bitcoin faced resistance near the 200-day EMA, raising the likelihood of a pullback towards $54,000 in the coming days. Conversely, a breakout could push the price towards $61,000, aligning with the 0.236 Fibonacci retracement line.

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