Bitcoin sinks 8% on liquidation fears, Ether slides 9%

SINGAPORE – Bitcoin sank to a four-month low on July 5, breaking below technical supports as traders anticipated the dumping of long-lost tokens from a defunct Japanese exchange and further selling by momentum-spooked leveraged players.

The price of the world’s largest cryptocurrency slid more than 8 per cent to US$53,523, below chart support around US$55,000 and its lowest since late February.

It has lost some 12 per cent for the week so far, even as many of the risk-sensitive assets it tends to track, such as the Nasdaq, have gained.

Ether slid 9 per cent to US$2,841, an over two-month low.

Media reports said Mt. Gox, the world’s leading exchange for cryptocurrencies before it collapsed a decade ago, may start returning bitcoin to creditors, who are seen as likely sellers since the token’s worth was only hundreds of dollars in 2014.

“The selling pressure is still related to creditor selling from the failed Mt Gox exchange,” Tony Sycamore, a market analyst at IG, said.

“However, the acceleration to the downside suggests the market is trying to get ahead of the creditor flows.”

Analysts have also pointed to worries over the possibility of US President Joe Biden being replaced as the Democrats’ presidential nominee by someone less pro-crypto after a shaky debate performance with rival candidate Donald Trump.

Bitcoin had a strong start to the year after the launch of exchange-traded funds in the United States, propelling it to a record US$73,803.25 in mid-March. However, it has since struggled.

“With an asset that has been rangebound for quite a while and recently in the lower end of that range, there are plenty of margined positions,” said Justin D’Anethan at digital assets market maker Keyrock, which are forced to sell as prices fall.

Over US$800 million (S$1.08 billion0 worth of bullish crypto bets were liquidated in the past three days, one of the heaviest such liquidations since April, Coinglass data show.

“Poor weekend liquidity will exacerbate any moves triggered by liquidations, even small ones,” said Caroline Mauron, co-founder of digital-asset derivatives liquidity provider Orbit Markets. In the meantime, the return of US investors from the July 4 holiday should help bring some stability, she added.

The operators of the power-hungry computers that underpin the Bitcoin blockchain are continuing to absorb the financial hit of April’s so-called halving, which curbed the new tokens they receive for the work they do. One response from these Bitcoin miners is to sell some of their inventory of tokens.

“The US$51,000-US$52,000 range is crucial as a lot of Bitcoin miners are reaching their break-even point for profitable mining,” said Le Shi, head of trading at market making and algorithmic trading firm Auros. REUTERS