New developments in the crypto space led to a price correction on Friday, sending the leading cryptocurrency to a four-month low. BTC fell as low as $53,500 on the day following news that the defunct crypto exchange Mt. Gox began making repayments to creditors.
In addition, the crypto asset was also pressured as German police moved about $75 million of crypto confiscated from a piracy website onto exchanges and new data from Federal Reserve’s minutes, which indicated that the central bank isn’t ready to cut interest rates yet.
Bitcoin later recovered and was trading near $55,700 at the time of writing.
Why is Bitcoin falling?
Friday’s Bitcoin price correction comes as crypto investors’ attention turned to the nearly $9 billion payout to users of the defunct Mt. Gox exchange.
Nobuaki Kobayashi, the trustee managing the Mt. Gox bankruptcy estate, said that repayments in Bitcoin and had commenced for some creditors through several designated crypto exchanges. However, he did not specify the exact amounts transferred to these exchanges.
Kobayashi indicated that the remaining funds would be distributed once certain conditions are met, including the validation of registered accounts and the completion of discussions between the trustee and the crypto exchanges.
He emphasized that the process aims to ensure repayments are made “safely and securely,” and asked “eligible rehabilitation creditors to wait for a while.”
At its peak, Mt. Gox was the largest Bitcoin exchange, handling 70% of all global Bitcoin transactions. The exchange shut down in February 2014 following a massive hack, and its former CEO was later convicted in a Japanese court for tampering with records.
Despite closing its operations a decade ago, the trustee has only recently begun issuing refunds to victims, with numerous delays having stalled the rehabilitation process.
The repayment process started last year, with many creditors confirming receipt of payments via bank transfer in Japanese yen.
Further contributing to the Bitcoin price correction was the German government transferring another substantial portion of its Bitcoin reserves to exchanges after seizing the funds from a piracy website Movie2k.to.
According to blockchain data, the German Federal Criminal Police Office (BKA) moved approximately $75 million worth of BTC across multiple transactions on July 4th. These funds were distributed across exchanges such as Coinbase (NASDAQ:), Kraken, and Bitstamp.
This recent transfer follows the government’s move of around $315 million in Bitcoin to various platforms since mid-June. In total, Germany has offloaded over $390 million in Bitcoin in less than a month.
Moreover, the Federal Reserve’s recent release of minutes from its June meeting revealed officials’ reluctance to lower interest rates until further data indicates a sustainable move toward the central bank’s 2% inflation target.
Higher interest rates generally reduce investor appetite for riskier assets like Bitcoin and other cryptocurrencies.
Bitcoin had surged to an all-time high of over $73,700 in March this year after the Securities and Exchange Commission approved the first U.S. spot Bitcoin exchange-traded fund (ETF).
Bitcoin price analysis
Bitcoin price has now pulled back 27% from the recent high and is approaching the 38.2% Fibonacci retracement level. This is the first major support block, which is located just below the $52,000 handle.
A break below this level would open the door for a deeper pullback, with the zone around $48,000 acting as the next strong support level. This horizontal support block proved to be an important trading zone in the past.
On the upside, the Bitcoin price would need to return to trade above $60,000 for the bearish momentum to disappear and for the bulls to regain control.
