Bitcoin prices rise nearly 6% after dropping to lowest point since February

Bitcoin prices rose again today after falling to their lowest level in more than four months amid weak market conditions.

According to data from CoinMarketCap, the world’s most popular digital currency reached a value of $56,856.61 this afternoon.

At this point, the cryptocurrency was up more than 5.8% after falling to $53,717.34, its lowest value since late February, shortly after midnight EST, additional figures from CoinMarketCap show.

After rising to the aforementioned daily high above $56,800, the digital asset experienced some volatility, but most of the gains made earlier today have been retained.

Explaining Bitcoin’s recent price fluctuations, several analysts suggested that the digital currency had become oversold as it plummeted over the past 24 hours.

Several media reports pointed to the announcement that Mt. Gox’s trustee had begun making payments to certain creditors as the reason why the digital currency had fallen to its lowest level in more than four months in the past 24 hours.

Tim Enneking, managing partner of Psalion, commented on this development, but emphasized that several factors contributed to the losses in bitcoin.

“In a market that was already relatively weak due to post-ATH consolidation, the usual summer dip, and the SEC pushing out the actual launch date of spot ETH ETF trading, concerns about Mt. Gox BTC receivers dumping (whether justified or not) clearly proved to be the straw that broke the camel’s back, sending spot BTC prices plummeting from $60,000 to nearly $53,000,” he said via emailed comments.

Armando Aguilar, an independent cryptocurrency analyst, also stressed that multiple variables contributed to the declines in the digital currency markets.

“When new supplies came into the market from Mt. Gox Trustee, it was revealed that there were BTC transfers to unknown addresses and the German government was also preparing to push out additional supplies. A low fear and greed index spooked the market, all these factors caused prices to plummet across the board,” he said via email comments.

As prices fell, bitcoin became oversold, causing the digital currency to rise in value again, Aguilar said.

Julio Moreno, head of research at CryptoQuant, also joined the conversation and gave a different perspective on the situation.

“Prices have fallen mainly due to selling/profit taking by large investors (whales) and mid-sized miners,” he said via Telegram.

“The sales through Mt. Gox and other entities (the German government) are relatively small compared to the total money supply in Bitcoin,” Moreno added.

“Various on-chain metrics indicated that there was oversold territory after prices reached $53,000, which could be the reason they recovered so strongly. For example, traders’ unrealized profits reached negative levels that we haven’t seen since the FTX crash.”

He added the chart below, which uses CryptoQuant data, to illustrate these developments:

Moreno also stressed that the amount of money seized by the US and German governments represents only a tiny fraction (about 1.6%) of the total realized value of bitcoin.

The difference can be visualized using the graph below:

Going forward, Mt. Gox sales may not be as big a headwind for the crypto market as some think, Enneking said, noting that investors who get their bitcoin back are unlikely to sell it right away.

“Unless one assumes that all Mt. Gox BTC recipients are idiots,” “they won’t all abruptly dump their long-awaited BTC immediately upon receipt – and since they’ve already waited 10 years, what’s another few months of waiting for the price to recover?” he said.

“So at some level BTC is clearly oversold and apparently the market believes the level is somewhere between 50 and 55,” Enneking claimed.

“Either way, once BTC actually gets distributed and the sky miraculously doesn’t fall in, BTC will experience an immediate and very healthy rally!” he predicted.

Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS, and SOL.