Bitcoin’s significant sell-off might offer buy-and-hold enthusiasts a chance to purchase BTC ETF shares at lower prices.
Spot Bitcoin dropped to around $53,500, a four-month low, on Friday due to anticipated large BTC liquidations by Germany’s government and Mt. Gox, the defunct Japanese crypto exchange.
The share prices of major BTC ETFs are already being affected, and continued market volatility could lead to appealing discounts.
Bitcoin ETFs, such as Franklin Templeton Digital Holdings Trust (EZBC), VanEck Bitcoin Trust (HODL), and iShares Bitcoin Trust (IBIT), have become the benchmark for spot BTC holders since U.S. regulators approved these publicly traded funds in January.
However, the robust protections and security measures of these funds have resulted in shares trading at persistent premiums to their net asset value (NAV) since their inception, driven by institutional investments.
As of early July, the top five Bitcoin funds traded at an average premium of nearly 1%.
ETFs rely on a select group of professional market makers called “authorized participants” (APs) to maintain ETF share prices aligned with the fund’s NAV.
These APs are the only traders allowed to exchange and redeem BTC ETF shares for spot BTC, profiting from intraday pricing spreads.
Currently, only a few APs are equipped to handle BTC spot trading, making ETF shares susceptible to sharp price movements in volatile markets.
The ongoing liquidations by Germany and Mt. Gox could introduce billions of dollars of sustained selling pressure, leading to volatility and potentially wider ETF price swings, creating arbitrage opportunities for traders.
If traders are hoping for an arbitrage similar to the Grayscale Bitcoin Trust (GBTC) discounts of late 2022, they might be disappointed.
The GBTC situation, where shares traded at discounts approaching 50% of NAV, is unlikely to reoccur due to vastly improved liquidity and increasing institutional investor awareness of BTC’s value.
Bitcoin funds have already seen $398 million in net inflows since the recent sell-off.
Nevertheless, significant opportunities might still be available.
In May, shares of BlackRock’s IBIT ETF briefly dipped to a discount of nearly 2% during institutional end-of-month rebalances amid market volatility.
Other funds, including FBTC, BITB, and ARK 21Shares Bitcoin ETF (ARKB), also traded at discounts of nearly 1.5%.
With upcoming BTC liquidations from Germany and Mt. Gox, market volatility is expected to rise.
Investors should monitor ETF arbitrage opportunities closely, especially in EZBC, HODL, and IBIT, which offer attractive management fee discounts, some waiving fees entirely until 2025.
Traders willing to navigate the current volatility may find benefits.
Despite the selling pressure, BTC could see a bullish turnaround by year-end, driven by potential Federal Reserve interest rate cuts and favorable odds for Donald Trump in the upcoming U.S. presidential election.
Now is the time to look for discounts.
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Blockchain-focused asset manager DigitalX has secured regulatory approval to launch its spot Bitcoin exchange-traded fund (ETF), marking the second Bitcoin ETF to trade on the Australian Securities Exchange (ASX).
Scheduled to list under the ticker BTXX on July 12 at 10 am local time, the DigitalX Bitcoin ETF’s approval was announced in a July 8 post on X by the firm.
Describing the approval as a “watershed moment,” DigitalX CEO Lisa Wade stated, “The DigitalX Bitcoin ETF is a spot ETF product that provides ASX customers with direct access to Bitcoin via a regulated and liquid fund structure.”
DigitalX’s chair Toby Hicks added, “It is exciting to see the growth and development of the digital assets markets reflected in this approval” in Australia.
To bring this product to market, DigitalX has partnered with K2 Asset Management, which will act as the responsible entity and issuer of the spot Bitcoin ETF.
Additionally, DigitalX will collaborate with 3iQ, a cryptocurrency-focused investment firm, to promote and distribute the product both in Australia and internationally.
This development follows closely behind the ASX’s approval of VanEck’s spot Bitcoin ETF on June 15, which began trading on June 20.
The VanEck Bitcoin ETF (VBTC) recorded $1.3 million in trading volume on its first day, significantly lower than the $450 million daily average seen by the nine U.S.-based spot Bitcoin ETFs during their initial 10 trading days.
In a related note, Australian fund manager Betashares is also pursuing a Bitcoin ETF on the ASX, according to an April report from Bloomberg.
The DigitalX Bitcoin ETF aims to capitalize on the increasing interest in digital assets, offering a regulated avenue for investors to gain exposure to Bitcoin.
As the second Bitcoin ETF on the ASX, BTXX is poised to attract both local and international investors looking to diversify their portfolios with digital currencies.
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Bitcoin mining difficulty saw a significant drop of over 5% on July 5, reaching a quarterly low of 79.50 terahashes per second (TH/s).
This reduction was the most substantial since March, when it briefly dipped below 80 TH/s. After spiking between March and May to an all-time high of 88.10 TH/s, the difficulty gradually settled to its current level at the time of this writing.
Bitcoin mining difficulty is quantified by hashrate, representing the number of attempts a mining machine makes to solve the cryptographic puzzle required to unlock a Bitcoin.
Hashrate updates occur every 2,016 blocks, approximately every two weeks. Generally, Bitcoin’s hashrate has increased monthly, with few exceptions.
In 2014, the hashrate was around 1.1 gigahashes per second, allowing most desktop PCs to mine Bitcoin.
As hashrate increases, more powerful and energy-efficient mining rigs are needed for profitability.
By the end of 2017, as Bitcoin adoption surged, the hashrate crossed the terahash threshold for the first time. As of July 6, 2024, the hashrate stands at 79.5 TH/s, awaiting the next difficulty adjustment.
Under the current difficulty of 79.5 TH/s, F2Pool, a prominent mining pool, suggests that an ASIC rig with an efficiency of 26 watts per terahash or better would remain profitable as long as Bitcoin’s price stays above $54,000.
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“With a $BTC price of $54k, ASICs with Unit Power of 26 W/T or less can make a profit. We estimate this at $0.07 per kWh,” F2Pool stated.
Should Bitcoin’s price fall below this threshold, more efficient mining rigs would be necessary to sustain profitability.
However, if the price remains stable, conditions are expected to be favorable for major miners, especially those in regions offering energy subsidies for mining operations.
In summary, the recent decrease in mining difficulty presents an intriguing shift in the Bitcoin mining landscape, affecting profitability and operational strategies for miners worldwide.
The industry will closely watch upcoming difficulty adjustments and market conditions to navigate these changes effectively.
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United States-based spot Bitcoin exchange-traded funds (ETFs) saw significant inflows on July 6, notably after Bitcoin’s price decreased to under $54,000 on July 4.
Farside Investors reported that these spot Bitcoin ETFs registered their largest net inflows for the month, attracting $143.1 million.
The Fidelity Wise Origin Bitcoin Fund (FBTC) received the most with $117 million, followed by the Bitwise Bitcoin ETF (BITB) which saw $30.2 million.
Additionally, the ARK 21Shares Bitcoin ETF (ARKB) and the VanEck Bitcoin Trust (HODL) ETFs gained $11.3 million and $12.8 million, respectively. However, the Grayscale Bitcoin Trust (GBTC) experienced a net outflow of $28.6 million.
Despite the market’s instability, the robust inflows into these ETFs indicate that institutional investors and significant buyers are seizing the opportunity to purchase Bitcoin at reduced prices during the downturn.
Hunter Horsley, CEO of Bitwise Asset Management, emphasized the efficiency of his team in acquiring Bitcoin at less than half a basis point.
He remains optimistic about Bitcoin’s future, presenting the current market conditions as an excellent opportunity for both new and existing investors.
“The outlook for Bitcoin has never been stronger.
“For many who don’t yet have exposure, this week is a chance to buy the dip,” he said.
In the same week, the BITB ETF saw inflows exceeding $66 million, bringing its total Bitcoin holdings to over 38,000 BTC.
Bitcoin critic Peter Schiff also weighed in on the situation.
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Despite the market’s volatility, he noted the resilience of Bitcoin ETF investors who have maintained their holdings without panic.
“So far, there’s no sign of panic.
“It will likely take a much larger drop in Bitcoin before they finally capitulate,” Schiff stated.
He speculated that a significant sell-off might be imminent, potentially leading to widespread capitulation among Bitcoin holders.
The decline in Bitcoin’s price was partly triggered by the transfer of 47,229 Bitcoin by the defunct Japanese crypto exchange Mt. Gox.
This marked its first significant transaction since May, moving the coins, worth approximately $2.71 billion at that time, to a new wallet address.
Bitcoin’s price briefly fell to $55,200 on Coinbase following the transfer.
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In a recent commentary on X, dated July 5, Ki Young Ju, the CEO of onchain analytics firm CryptoQuant, addressed the concerns surrounding government sell-offs of Bitcoin (BTC).
He emphasized the relatively minor impact of these sell-offs on the overall market, advising traders not to react impulsively to such events.
Ki stated, “Don’t let government selling FUD ruin your trades.”
He highlighted that the amount of Bitcoin being offloaded by governments globally is insignificant when compared to the massive inflows the cryptocurrency market has experienced.
Since the onset of the latest bull market, the crypto space has seen nearly $250 billion in inflows, whereas the total potential government sales of BTC amount to less than $10 billion.
Ki further explained, “Govt Bitcoin selling is overestimated,” adding, “$224B has flowed into this market since 2023. Government-seized BTC contributes about $9B to the realized cap.”
This perspective offers a calm contrast to the recent volatile price movements in BTC, which have been influenced by government actions and the ongoing transfers from accounts associated with the defunct exchange Mt. Gox.
READ MORE: Bitcoin Drops Over 2% on July 4 as Key Support Line Faces Retest Since October 2023
The primary sellers in focus are Germany and the United States, with Germany holding approximately 41,200 BTC confiscated from criminal activities, as reported by Arkham, a crypto intelligence agency.
Despite the prevailing nervous market sentiment, as indicated by the Crypto Fear and Greed Index nearing “extreme fear,” Ki believes the panic induced by government actions alone is disproportionate.
He reasoned, “It’s only 4% of the total cumulative realized value since 2023,” reinforcing his earlier statement, “Don’t let govt selling FUD ruin your trades.”
As the market continues to monitor critical support levels, the narrative remains cautious but observant of potential rebounds.
Current evaluations place the supertrend floor at $52,000, with potential scenarios predicting a dip to $45,000, aligning the current downturn with historical trends.
Moreover, established bull market supports such as the 200-day moving average and Bitcoin’s short-term holder cost basis are currently pegged at $58,550 and $64,175, respectively.
On a related note, Bitcoin hit a four-month low of $53,500 on July 5 but saw a modest recovery, trading approximately $3,000 higher the following day, according to data from Cointelegraph Markets Pro and TradingView.
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Bitcoin recently saw a rebound, rising 6.40% on July 6 to a value of $56,975 after experiencing a five-month low the previous day.
This resurgence suggests traders are starting to mitigate the bearish impacts triggered by Mt. Gox’s massive $8 billion BTC reimbursement and recent BTC selloffs conducted by the U.S. and German governments.
Efforts to stabilize market perceptions have been ongoing among leading cryptocurrency analysts.
They seek to diminish concerns surrounding the substantial sell-offs and emphasize Bitcoin’s robust long-term prospects.
Ki Young Ju, the CEO of CryptoQuant, highlighted that the $8 billion in government-controlled BTC represents a small fraction—just 4%—of the $225 billion infused into the Bitcoin market since 2023.
This perspective underlines the market’s capability to handle such disruptions without destabilizing effects.
Furthermore, liquidity concerns related to possible future actions by the German government, which holds about 42,000 BTC, are also being downplayed.
Market analysts reassure that the Bitcoin market is resilient enough to absorb potential impacts if these holdings were to be sold off.
Trader Tardigrade, an independent analyst, drew comparisons between the current market scenario and past significant market events, often referred to as ‘black swan’ events.
He said, “In 2016, 2020, and 2024, $BTC moved in the same pattern.
Besides 2020, $BTC Fakeout was seen below the trendline. After reclaiming above trendline, a Bull Run follows,” suggesting that the current situation could similarly lead to a robust market recovery and an ensuing bullish phase.
READ MORE: Bitcoin Drops Below $58,000 for First Time in Two Months Amid Major Liquidations
Rekt Capital, another analyst, noted that the current sell-offs align with the typical cycles observed post-Bitcoin halving events, which historically lead to a temporary price decline as the market adjusts to reduced supply.
However, this phase is often followed by a price surge driven by decreased supply coupled with heightened demand.
Bitcoin’s rebound was also partly influenced by positive movements in the U.S. stock market, with the S&P 500 hitting a record high in a post-holiday trading session that noted a thin volume.
This spike in equities came despite data indicating a slowdown in U.S. hiring and an increase in the jobless rate, prompting predictions of a potential interest rate cut in September, which is generally favorable for Bitcoin and other higher-risk assets.
The effects of these broader economic indicators were mirrored in the cryptocurrency markets.
For example, on July 5, following the release of U.S. jobs data, Bitcoin ETFs saw an influx of $143.1 million after experiencing outflows in the preceding days.
Additionally, Bitcoin’s futures market showed increased funding rates, although open interest dropped, indicating a phase where less confident investors exit while others increase their stakes, anticipating a price rise.
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CryptoQuant, a market intelligence firm, has observed indicators that Bitcoin miner capitulation metrics are nearing levels similar to those seen after the FTX crash in late 2022, suggesting a potential bottom for Bitcoin prices.
Miner capitulation occurs when miners scale back operations or sell part of their mined Bitcoin and reserves either to sustain themselves or to “earn yield or hedge their Bitcoin exposure.”
In recent times, as Bitcoin’s price declined by 13% from $68,791 to $59,603 over the last month, signs of capitulation have become more evident.
One significant indicator of this trend is the decrease in Bitcoin’s hashrate, which is the total computational power used to secure the network.
This hashrate has fallen by 7.7% to 576 EH/s, reaching a four-month low after previously hitting a record high on April 27.
This drop in hashrate mirrors a similar reduction seen in late 2022, which historically correlated with the market bottoming out at $15,500 before a subsequent 300% increase in Bitcoin’s price over the following 15 months.
CryptoQuant’s analysis also points out that since the last Bitcoin halving, miners have been substantially undercompensated, as shown by the miner profit/loss sustainability indicator.
This has resulted in a 63% reduction in miners’ daily revenues from $79 million on March 6 to $29 million currently, with revenues from transaction fees dropping to just 3.2% of the total, marking the lowest since April 8.
READ MORE: Bitcoin Drops Below $58,000 for First Time in Two Months Amid Major Liquidations
Moreover, the decline in revenue has compelled miners to dip into their reserves to generate yield, leading to a notable increase in daily miner outflows, the highest since May 21.
This trend suggests that miners might be selling off their Bitcoin reserves.
Despite significant outflows in May, they remained below extreme levels (twice the 1-year average), indicating a measured approach to selling.
The overall impact of these sales, combined with those from Bitcoin whales and national governments, has pressured Bitcoin’s price to a four-month low of $53,499 on July 5.
Furthermore, the downturn has affected the ‘hash price,’ a metric of mining profitability per unit of computational power, which now stands at $0.049 per EH/s, barely above the record low of $0.045 seen on May 1.
Reflecting on the broader implications, a report from Cantor Fitzgerald highlighted that major mining firms could face significant challenges if Bitcoin prices were to drop to $40,000, underscoring the precarious situation of the mining industry.
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On July 4 bitcoin experienced a dip of over 2%, testing a key support line for the first time since October 2023.
Data from Cointelegraph Markets Pro and TradingView revealed new local lows of $57,885 on Bitstamp following the latest daily close.
This decline was driven by a lack of positive sentiment and consistent selling pressure from spot markets, creating a challenging environment for Bitcoin bulls.
CoinGlass reported that 24-hour Bitcoin long liquidations approached $60 million at the time of writing.
Popular trader Skew noted that BTC/USD had crossed its 200-day moving average (MA) for the first time in ten months.
“So far since trend rejection & reversal around $63.8K spot selling has been the main driver of this trend,” he explained on X.
“So in order for this HTF MA to actually act as a systematic trigger for the market we need to see market demand & reversal signs. Else volatility & momentum pick up to the downside.”
At the time of writing, the 200-day MA was at $58,400, slightly below the spot price after a brief low timeframe bounce.
READ MORE: Bitcoin Drops Below $60,000 Amid Potential $9 Billion Mt. Gox Payout and Whale Activity
Looking at the broader picture, trading suite DecenTrader highlighted a significant amount of long liquidations closer to $50,000 if the price continues to decline.
“If Bitcoin does breakdown then $51k – $52k remains the area where there is a significant amount of 3x, 5x, and 10x longs liquidity. To the upside, the shorts liquidity is at $76k-78k,” it noted.
Charles Edwards, founder of Capriole Investments, pointed to clear factors influencing Bitcoin’s recent downside.
Alongside data from on-chain analytics firm Glassnode, he observed significant sell-side pressure throughout the year.
The launch of United States spot Bitcoin exchange-traded funds (ETFs) in January had failed to absorb this pressure.
“This is why we haven’t mooned yet. Saylor, Michael Dell, ETFs. It’s all noise,” he told his followers on X.
“When you look at the data of the 4 most important players in Bitcoin, we have net flows equivalent to $24B being dumped on the market in 2024.”
Edwards emphasized that ETFs are not the only demand factor in the current market.
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On July 4, Bitcoin‘s price briefly dropped to $57,874 on Coinbase, marking its first dip below $58,000 in over two months.
Since then, it has stabilized at $58,964 but remains down 3.4% for the week, according to TradingView.
This slump is attributed to the liquidation of leveraged long positions.
Data from CoinGlass reveals that more than $54.9 million in Bitcoin long positions were liquidated within the past 24 hours.
“Nearly $60 million in Bitcoin longs have been wiped in the last 24 hours,” states CoinGlass.
Ether traders also faced significant losses ahead of the anticipated launch of several spot Ether ETFs, expected by mid-July. In total, $57.9 million in Ether long positions were liquidated during the same period.
Much of the blame for Bitcoin’s broader price pullback is attributed to the defunct Japanese crypto exchange Mt. Gox, which is set to begin repayments of approximately $8.5 billion worth of BTC to its creditors starting in early July.
However, some analysts believe these repayments may not have as severe an impact on Bitcoin as anticipated.
Other major cryptocurrencies and altcoins also experienced sharp declines during Bitcoin’s brief dip. Ether dropped 4.5%, briefly hitting $3,145 during a sharp sell-off at 2:00 am UTC on July 4.
BNB fell 6%, decreasing from $573 to $539 at the time of writing. Solana saw a 10.3% decline, falling from a weekly high of $154 to $136.
Meanwhile, mentions of “buy the dip” surged across social media platforms.
The use of this phrase has doubled on Reddit, X, and 4Chan over the last two days.
These recent movements in the crypto market highlight the volatility and significant impact of leveraged positions on price fluctuations.
The upcoming Mt. Gox repayments and the launch of Ether ETFs are key events that market participants are closely monitoring.
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A cryptocurrency wallet associated with the German government transferred over 3,000 Bitcoin, valued at more than $172 million, to various crypto exchanges and a separate wallet.
On July 4, blockchain investigator PeckShieldAlert reported a substantial outbound transfer of 1,300 Bitcoin from a wallet labeled as belonging to the “German Government (BKA).”
These Bitcoin, worth $75 million, were distributed among three major crypto exchanges: Coinbase, Kraken, and Bitstamp.
Further investigation by Cointelegraph revealed that the German government wallet also transferred an additional 1,700 BTC to a different wallet address simultaneously.
The PeckShield team later confirmed this to Cointelegraph, stating:
“Total 3K out (from German gov’t labeled wallet), including 1.3K -> CEXs and 1.7K -> (to a wallet address) 139PoPE1bKQam8QJjhVjYDP47f3VH7ybVu.”
According to data from onchain analytics platform Arkham Intelligence, while the initial 1,300 BTC were sent to centralized exchanges, the remaining 1,700 BTC were moved to a separate cryptocurrency wallet.
Over the last two weeks, the German government has transferred more than 3,000 BTC to various exchanges.
These significant transfers, alongside ongoing movements from the United States government and the approaching Mt. Gox repayments, pose a potential increase in selling pressure on Bitcoin.
Since February 2024, the wallet labeled as the German government’s has held 50,000 BTC, gradually transferring a significant portion of its holdings over the past few months.
Governments, including Germany, have confiscated Bitcoin and other digital assets linked to criminal activities and periodically auction off these seized assets.
In a notable precedent, the United States government has sold a large portion of Bitcoin seized from the notorious dark web marketplace Silk Road.
In 2014, Tim Draper, an American entrepreneur and Bitcoin advocate, purchased 29,656 BTC from the Silk Road seizure in an auction conducted by U.S. marshals.
These ongoing transactions highlight the continued involvement of government entities in the cryptocurrency market and their efforts to manage and liquidate seized digital assets.
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