On Friday, new developments in the crypto space triggered a price correction that took the leading cryptocurrency to a four-month low. BTC fell to $53,500 the day after news broke that defunct cryptocurrency exchange Mt. Gox began making payments to creditors.
Additionally, the crypto asset also came under pressure as German police moved around $75 million worth of confiscated cryptocurrencies from a hacking website to exchanges and new data from the Federal Reserve minutes indicated that the central bank is not yet ready to cut interest rates.
Bitcoin later recovered and was trading near $55,700 at the time of writing.
Why is Bitcoin falling?
Friday's Bitcoin price correction comes as cryptocurrency investors' attention was focused on the nearly $9 billion payout to users of the defunct Mt. Gox exchange.
Nobuaki Kobayashi, the trustee managing the Mt. Gox bankruptcy estate, said that bitcoin repayments had begun for some creditors through several designated cryptocurrency exchanges. However, he did not specify the exact amounts transferred to these exchanges.
Kobayashi said the remaining funds would be distributed once certain conditions are met, including validation of registered accounts and completion of discussions between the trustee and cryptocurrency exchanges.
He stressed that the process is intended to ensure that repayments are made “in a safe manner” and asked “eligible rehabilitation creditors to wait a while.”
At its peak, Mt. Gox was the largest bitcoin exchange, handling 70% of all bitcoin transactions globally. The exchange shut down in February 2014 following a massive hack, and its former CEO was later convicted in a Japanese court of tampering with records.
Despite having closed its operations a decade ago, the trustee has only recently begun issuing refunds to victims, and numerous delays have stalled the rehabilitation process.
The repayment process began last year and many creditors confirmed receipt of payments via bank transfer in Japanese yen.
Another contribution to the Bitcoin price correction was that the German government transferred another substantial portion of its Bitcoin reserves to exchanges after confiscating funds from the piracy website Movie2k.to.
According to blockchain data, Germany’s Federal Criminal Police Office (BKA) moved approximately $75 million worth of BTC in multiple transactions on July 4. These funds were distributed across exchanges such as Coinbase (NASDAQ:), Kraken, and Bitstamp.
This latest transfer comes after the government transferred around $315 million worth of bitcoins to various platforms since mid-June. In total, Germany has disposed of more than $390 million worth of bitcoins in less than a month.
What's more, the recent release of minutes from the Federal Reserve's June meeting revealed officials' reluctance to lower interest rates until more data indicate a sustainable move toward the central bank's 2% inflation target.
Higher interest rates typically reduce investors' appetite for riskier assets like Bitcoin and other cryptocurrencies.
Bitcoin had surged to an all-time high of over $73,700 in March this year after the Securities and Exchange Commission approved the first spot Bitcoin exchange-traded fund (ETF) in the US.
Bitcoin Price Analysis
Bitcoin price has pulled back 27% from the recent high and is approaching the 38.2% Fibonacci retracement level. This is the first major support block, which lies just below the $52,000 level.
A break below this level would open the door for a deeper pullback, with the area around $48,000 acting as the next strong support level. This horizontal support block proved to be an important trading zone in the past.
On the upside, Bitcoin price would need to trade back above $60,000 for the bearish momentum to fade and bulls to regain control.
