5 min read- Bitcoin slumps 11% in 7 days to a 4-month low
- Wallets linked to Mt Gox do test transactions
- Fears of a mass sale pressurises the Bitcoin price
- USD falls ahead of US non-farm payroll report
Bitcoin tumbled sharply to a 4- 4-month low on Friday, extending its recent sell-off. The market is becoming increasingly nervous about the potential impact of the upcoming distribution from the defunct crypto exchange Mount Gox and from the German police.
Bitcoin has tumbled 8.5% in the past 24 hours to a low of 54,000, marking its weakest level since March. The cryptocurrency has tumbled over 11% in the past seven days and now trades in a bear market, as wallets associated with Mt Gox were seen carrying out test transactions. This has ramped up fears of an imminent distribution by the exchange.
Mt Gox liquidators had announced last month that they would begin returning stolen Bitcoin and Bitcoin cash from a 2014 hack to clients at the start of July. The fact that Bitcoin has sold off so sharply suggests that the market is fearful that most receivers of these tokens will be inclined to sell them, particularly given the exponential price rally in Bitcoin over the past decade. In 2014, Bitcoin was trading at around $2000!
Mass selling of the token would increase supply significantly, putting pressure on the Bitcoin price. Traders are pre-empting the move and selling out to lock in profits they have seen so far this year.
German police sale adds to oversupply worries.
Concerns have been further fueled by German police, who are also rattling the market. German police have been seen moving $75 million worth of crypto confiscated from a piracy website onto exchanges, fuelling fears of another mass sell event similar to one seen earlier this year.
The selloff hasn’t been confined to Bitcoin, with altcoins across the board bleeding out. Ether has tumbled 9%, dropping towards 2800, while Cardano is down some 15%.
USD falls ahead of US non-farm payroll
Interestingly, these sell-offs in crypto are happening even as US equities trade near record highs and as the US dollar is set to book losses across the week.
Softer-than-expected data this week and a more dovish-sounding Federal Reserve chair, Jerome Powell, have raised expectations that the Fed could cut interest rates sooner.
Attention is now on the US non-farm payroll report, which is due later today and is expected to show a softening labour demand.
Economists expect 190,000 jobs to be added to the economy in June, down from 272,000 in May. Meanwhile, average wage growth is likely to slow to 0.3%, down from 0.4%. This week’s lead indicators, including the ADP payrolls, the employment subcomponent of the services PMI, and jobless claims, pointed to a weaker-than-expected non-farm payroll report.
Signs that the US economy is slowing and the jobs market is cooling could fuel expectations that the Federal Reserve could start cutting rates as soon as September. The market is currently pricing in a 69% probability that the Fed will cut rates in September, up from 56% at the start of the week. A lower interest rate environment is more beneficial for risk assets such as Bitcoin due to increased liquidity.
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