Bitcoin Drops Over 10%, Thanks to Mt. Gox Distribution & Other Reasons

Bitcoin (BTC) experienced a significant drop of over 10% this week, dropping from above $66K to only slightly above $59K.

Now, you might be wondering what exactly led to such a drastic decline in the fortune of the king coin.

We investigated the phenomenon and found out that there are three primary reasons behind the drop in Bitcoin’s value:

1. Mt. Gox Distribution Plan

The first shock to Bitcoin came from the latest announcement of the defunct Japanese cryptocurrency exchange Mt. Gox regarding the distribution of funds.

On 24th July, Mt. Gox announced that it will start distributing Bitcoin and Bitcoin Cash the next month that were stolen from the wallets of its customers.

Mt. Gox began operating in 2010, becoming the world’s largest crypto exchange within a few years only.

At one point, it was handling over 70% of all Bitcoin transactions worldwide.

But the exchange was beset with hacks, resulting in the total loss of an estimated 740,000 Bitcoin (worth $15 billion as of now).

It is worth noting that those customers will receive these digital assets at the current value (~$60K), while they had purchased them at a much lower price ($100-$300) back in 2010-2014.

This will force Mt. Gox to let go of some of its holdings, putting selling pressure on Bitcoin markets.

Consequently, the announcement triggered a market panic, leading to a drop in Bitcoin’s value. 

2. German Government’s Massive Sell-off

According to Arkham Intelligence, the German Federal Criminal Police Office (BKA) has recently made two transfers of $12 million and $7.7 million in Bitcoin each to the leading crypto exchange Kraken.

• BKA recently transferred $12 million and $7.7 million in Bitcoin each to Coinbase and Bitstamp, the other two leading exchanges.

   

• The BKA also made two transfers totalling $61.2 million in Bitcoin to an unknown wallet the last day. 

Source: Arkham Intelligence

Over the past week, BKA has sold nearly $300 million worth of BTC and still retains about $2.8 billion in Bitcoin.

The BKA is the federal investigative police agency of Germany which had seized approximately 50K BTC, valued at over $2 billion at press time, from a film piracy website.

These high-value transactions in Bitcoin have further triggered panic on the crypto charts. 

3. Bitcoin ETFs Witness Huge Outflows

Bitcoin spot exchange-traded funds (ETFs) in the U.S. have experienced huge outflows totalling $1.3 billion within the last two weeks.

The phenomenon has coincided with the decline in BTC’s price of late. 

Source: SoSoValue

It was in January 2024 that the Securities and Exchange Commission (SEC) approved the listing of spot Bitcoin ETFs, a phenomenon that has the potential of turning crypto into a mainstream financial asset.

However, recent activity reveals that more and more investors are exiting the Bitcoin ETF market as the price of the king coin drops, revealing a trust deficit. 

Bitcoin Rebounds Again...

Despite the above-mentioned trio of reasons behind Bitcoin’s decline, the king coin was quick to rebound.

BTC was trading around $61.5K at press time. 

Source: BitDelta, BTC/USDT

We recommend for investors to keep a close watch on the price movement of BTC and the latest news in the crypto market to make a wide trading decision.