After June 18, another wave of market correction followed on July 5, marking a renewed round of cryptocurrency market sell-offs.
On July 5, Bitcoin, defending its stronghold at 60,000, struggled as its downturn persisted after breaching the 58,000 mark post-midday, touching 53,363.32 USD at one point. Currently hovering around 54,000 USD, it has dropped by 7.13% in the past 24 hours, revisiting February-end levels. Ethereum followed suit, slipping below 2,900 USD to 2,868 USD, marking a 8.62% decline within 24 hours. Beyond major coins, most altcoins, which were perceived to have already reached their lowest, have collectively dropped by another 20%.
According to Coinglass data as of 2:21 PM, total liquidations in the past 24 hours amounted to 683 million USD, with long positions accounting for 590 million USD and shorts less than 100 million USD, indicating a one-sided market trend.
Returning to June 18, Bitcoin was hovering in the range of 64,000 to 66,000, anchored by major holdings. In just half a month, it has plummeted to the 55,000 level. What has transpired in the market? Will it be about holding ground or retreating timely?
In terms of events, the overall Bitcoin narrative has not undergone significant changes, with ETF and miner topics still in discussion, heavily reliant on macroeconomic expectations, all of which show no clear progress.
Regarding macroeconomic expectations, although the market generally supports a rate cut in September, the Federal Reserve’s stance remains unclear. Minutes from the Fed’s meeting indicated that participants believe inflation is moving in the right direction but not fast enough to warrant rate cuts. On July 2, Fed Chairman Jerome Powell reiterated during the European Central Bank Forum in Sintra, Portugal, that recent U.S. inflation pressures have eased, but more data is needed before deciding on rate cuts.
ETF data has shown lukewarm interest. Despite persistent market declines, ETFs saw continuous net inflows over five working days starting June 25, turning negative only on July 2 and 3, with inflows and outflows in the range of 20 million USD, insufficient to significantly impact the market.
In the industry, miners continue to sell off. Over the past week, miners have sold over 150 million USD worth of BTC, though sales volumes have notably decreased, coinciding with a gradual recovery in hash rates, indicating diminishing miner capitulation effects.
However, these factors have yet to resolve the issue of Bitcoin’s short-term liquidity crunch. Against this backdrop, short-term narratives and market movements are more susceptible to sharp fluctuations, as evidenced by the July 5 events.
In the past two weeks, two major events closely tied to the market unfolded: Germany’s BTC sales by the government and the commencement of compensation processes in Mt. Gox.
As early as January this year, the German government announced the seizure of nearly 50,000 BTC from suspects in the investigation of the pirate streaming platform movie2k, valued at approximately 2.1 billion USD. According to German regulations, certain federal states require the immediate sale of seized assets. However, due to ongoing discussions and divisions over asset handling, this substantial cache has remained relatively dormant.
By June, movements began with Germany selling Bitcoin. Starting from June 19, Germany began selling BTC, with 6,500 BTC sold on the first day and subsequent smaller transfers. On July 4, the German government transferred another 1,300 BTC to exchanges and moved 1,700 BTC to anonymous wallet addresses. Within about two weeks, Germany has sold approximately 9,400 BTC, retaining 41,774 BTC in its reserves. This afternoon at 3 PM, the German government transferred another 500 BTC, valued at approximately 27.07 million USD, to a new address starting with 139P.
Simultaneously, a negative development in Mentougou added fuel to the fire. In June, prior to formal compensation, Mentougou announced plans to begin reimbursements in early July, emphasizing gradual sales to avoid market upheaval. However, panic emerged due to potential selling pressure from nearly 140,000 BTC, almost causing Bitcoin to slip below 60,000. In July, Mentougou formally initiated actions. On July 4, Arkham platform displayed Mentougou’s testing transfers. On July 5, PeckShieldAlert reported that an address receiving 47,200 BTC from Mt. Gox transferred funds to two new addresses, with 44,500 BTC going to an address starting with 16ArP3 and approximately 2,700 BTC to an address starting with 1JbezD.
Outside these events, the U.S. government and rumors of mysterious Eastern forces were also drawn into the fray. On June 27, over 240 million USD worth of BTC was transferred from a private wallet to the Coinbase platform, particularly wallets associated with institutional traders. According to blockchain data, this BTC was seized by the U.S. government in 2024 from drug trafficker Banmeet Singh, although subsequent sales remain unclear. Subsequently, the U.S. government addresses gradually transferred out 248 BTC and 3,375 ETH, sparking rumors of U.S. government sell-offs.
While the U.S. government’s actions are traceable, the involvement of Eastern mysterious forces remains speculative. Market rumors suggested that a province in China sold 11,000 BTC over a week, with more than half already sold, averaging 1,000 BTC per day. Though the authenticity of these reports remains uncertain, blockchain data confirmed significant whale address movements.
Despite practical sell-offs—a modest 10,000 BTC from Germany in half a month, no significant U.S. government movements, and only a few thousand BTC from Eastern forces—Mentougou’s potential impact remains manageable. Exchange data supports this, with BTC transfers to exchanges as of 8 AM today significantly lower than a week ago.
However, the market’s liquidity deficiency, evident in today’s substantial downturn, remains the critical issue. Particularly today, during the U.S. Independence Day holiday period, market liquidity is naturally constrained, exacerbated by selling pressures that Wall Street struggled to absorb, fostering market panic and a spiral of decline, prompting long-term holders to capitalize on the downturn.
Social media has exacerbated panic. In cryptocurrency forums, overseas media’s stance on price optimism versus pessimism may be politically correct, but according to Sentiment findings, mentions of selling outnumber buying in the last 24 hours.
While attributions are analyzable, the path forward remains uncertain. Analysts are divided on whether it’s time to buy the dip or cash out while ahead.
eToro market analyst Josh Gilbert believes current bearish news outweighs bullish signals, expecting further deterioration in Bitcoin’s price over the next few days, foreseeing short-term weakness testing down to 50,000 USD or lower, with 52,000 USD as a critical battleground for bears and bulls.
Markus Thielen from 10x Research supports this view, predicting potential declines to 50,000 USD over the coming weeks, cautioning that “as support levels break, sellers will seek liquidity, accelerating sell-offs.”
Yet, many traders remain optimistic, believing the bottom price has been established. A significant sign is nearing the end of miner capitulation, with BTC prices at 54,000 USD, where only five models of miners, including those with Antminer and Avalon, remain profitable for operators, potentially signaling a local bottom. Partner at Primitive Crypto, Dovey Wan, noted, “Bitcoin miners are on the verge of capitulation. The breakeven point for S19 is at 52,000, a perfect position for a local bottom.”
However, despite these events, negative news continues. In Germany’s case, despite unilateral calls from legislators to halt sales for market risk reduction, sales are expected to continue given Germany’s regulatory and operational consistency. In response, Sun Yuchen directly called for off-market purchases of German BTC on platform X, seemingly more for marketing purposes. As for Mentougou, notices were issued today to begin repaying creditors with Bitcoin and Bitcoin Cash, with trustees reiterating that repayments will be conducted through designated cryptocurrency exchanges according to the compensation plan.
However, the primary cause of this scale of sell-off is actually insufficient buying power. Data shows that only 35,000 BTC accumulated on exchanges in the past 24 hours, a quantity that, back in 2021, would have been a day’s consumption in a bull market or a few days’ in previous months, yet now may take over three weeks to digest.
Furthermore, price declines during Asia’s trading hours, a typical pattern in this cycle, have also occurred multiple times. With the holiday period in the U.S., market liquidity is naturally lower. However, speculation suggests that upon returning to U.S. trading hours, buying strength will quickly increase, potentially stabilizing the downturn in the short term.
Ahead, the key data to watch is the non-farm payroll data. Scheduled tonight at 8:30 PM Beijing time, the U.S. Department of Labor will release the June employment report. According to compiled economist expectations, the median forecast predicts an increase of 190,000 jobs in June, with the unemployment rate expected to remain unchanged at 4%.
The unemployment rate will be the focal point. Technically, an increase to 4.2% in the U.S. unemployment rate triggers the “Sam Rule.” According to this rule, a three-month moving average of the unemployment rate rising by 0.5 percentage points or more from its low over the previous 12 months indicates an impending recession. In simpler terms, rising unemployment suggests economic downturn, potentially increasing the likelihood of rate cuts. If the employment report shows positive indicators, the Fed is more likely to maintain its current rate policy.
Ultimately, the market’s current core issues revolve around liquidity
