Bitcoin fell to a four-month low on Friday, breaking below key technical support levels as traders anticipated the release of long-held tokens from a defunct Japanese exchange and additional selling by momentum-driven leveraged traders. The price of the world’s largest cryptocurrency dropped more than 8% to $53,523, falling below the $55,000 support level and hitting its lowest point since late February. This week, it has declined by approximately 12%, even though other risk-sensitive assets like the Nasdaq (.IXIC) have shown gains.
Ether also dropped, sliding 9% to $2,841, marking its lowest point in over two months. Media reports indicated that Mt. Gox, once the leading exchange for cryptocurrencies before its collapse a decade ago, might begin returning bitcoin to creditors. These creditors are expected to sell since the tokens were valued at just hundreds of dollars in 2014.
“The selling pressure is still related to creditor selling from the failed Mt. Gox exchange,” said Tony Sycamore, a market analyst at IG. “However, the acceleration to the downside suggests the market is trying to get ahead of the creditor flows.”
Bitcoin had a strong start to the year following the launch of exchange-traded funds in the U.S., reaching a record high of $73,803.25 in mid-March. However, it has since struggled. “With an asset that has been range-bound for quite a while and recently at the lower end of that range, there are plenty of margined positions,” said Justin D’Anethan of digital assets market maker Keyrock, which are forced to sell as prices fall. “This, of course, creates a cascading effect, pushing prices further down than it might in a market with less leverage.”
