BTC’s shocking tumble continues amid selloffs: Potential price floor or rebound?

Bitcoin slid below the $60,000 psychological resistance to go below the $58,000 price point on July 4, the first time it has touched such lows in two months.

Bitcoin’s switch from a bullish outlook to a potential massive value haemorrhage began around July 1 when defunct Japanese exchange MT Gox revealed it would be reimbursing about $9 billion in client funds, 10 years after it went under. The past 24 hours have seen BTC fall below two-month lows with the exchange dumping about $2.7 billion in BTC. Analysts expressed concern that the dump would encourage major sell offs, as reimbursed holders seek to capitalise on huge 10-year gains. 

The German government has exacerbated the situation for bitcoin holders with reports indicating that it has liquidated about $175 million (3000 BTC) within the last 24 hours. According to Arkham data, the government has also transferred 1700 BTC  with the majority going to an unidentified address with the rest distributed among popular exchanges.

This mirrors similar transactions made over the past two weeks. Notably, on Tuesday July 2, where the government sent approximately $17.6 million worth of Bitcoin to various exchange addresses.  The US government had also dumped some 3,940 BTC to Coinbase Prime at 11 am ET on June 26, reportedly belonging to drug dealer Banmeet Singh. Analysts expect more sell pressure if reports of more BTC dumps persist, but there is a case for a potential rebound. 

With the billions wiped out overnight, Tron’s founder Justin Sun has offered to buy $2.3 billion worth of Bitcoin from the German government, to counter the effect of that government’s dump on the market. Though it's not clear how serious Justin is about negotiating with the German government, quantifying the potential move will be of interest to traders and investors. 

According to Bitget’s David Mustac, it would take about $134.85 million to move the BTC market 1% given the average slippage of 0.1% per $500 million traded. With that in mind, Justin’s potential $2 billion plus pump would move the market approximately 17%, potentially returning the market to recent highs of around $64,000. 

Market sentiment could also be a major driver if a bounce is to be realised soon. Crypto research firm Santiment tracked the total mentions of the phrase “buy the dip” on social platforms Reddit, X, 4chan and Bitcoin Talk, and noted that the general sentiment was that the dip was a buying opportunity. Concerns do linger as well, with the crypto Fear and Greed index reading at 44.

Source: Alternative.me

Some analysts are also banking on Bitcoin’s price seasonality as an anchor in the face of the current price drop. According to Cointribune, BTC’s strongest months since 2015 have been October, February and July.  A QCP analysts report from July 1, noted that bitcoin has a median return of 9.6% in July and tends to bounce back strongly especially after a negative June, indicating that a bounce could occur later in July. 

With markets on the lookout for reports of further liquidations, many analysts including Lennix Lai, chief commercial officer of crypto exchange OKX, expect the effect of the liquidations to be contained and short-lived - citing the Silk Road case. The case saw authorities seize $3.6 billion worth of bitcoin from James Zhong and did not lead to a protracted catastrophic price drop. 

Others analysts such as James Butterfill, head of research at CoinShares pointed to Bitcoin’s daily trade volume of $8.74 billion on trusted exchanges this year - making the case that there was enough liquidity to absorb the current selling pressure. 

At the time of writing, BTC is touching lows last seen in February with the daily chart indicating bearish sentiment. Prices are below the 100-day EMA while touching the lower bollinger band - a sign of seller dominance. The RSI edging down sharply into the oversold region could however be a sign that a bounce is in the offing. 

Weekly time frame watch

The weekly time frame provides some price points to watch amid the sell off. 

Source: Deriv MT5

Selling pressure could encounter a hurdle at the $47,800 mark. Sustained strong selling could see BTC touch lows of $42,000 that were last seen in December. A bounce could struggle to breach the $60,000 support and resistance price that bears fell through on July 4. 

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