Bitcoin Faces Largest Weekly Drop in Over a Year Amid Mt. Gox Concerns and Leveraged Selling

Bitcoin was set for its biggest weekly fall in more than a year on Friday as traders grew anxious about the potential dumping of tokens from the defunct Japanese exchange Mt. Gox and further selling by leveraged players following the cryptocurrency’s strong run.

The price of the world’s largest cryptocurrency dropped as much as 8% in one day to $53,523, its lowest since late February. It was on track for a more than 12% weekly decline, marking its most significant drop since early November 2022. Ether, a rival token, also fell 9% to $2,841, hitting a two-month low.

Media reports indicated that Mt. Gox, which was the world’s leading cryptocurrency exchange before its collapse a decade ago, may start returning bitcoin to creditors. These creditors are expected to sell since the token’s value was only a few hundred dollars in 2014.

“The selling pressure is still related to creditor selling from the failed Mt Gox exchange,” said Tony Sycamore, a market analyst at IG. “However, the acceleration to the downside suggests the market is trying to get ahead of the creditor flows.”

Analysts have also noted concerns over the possibility of Joe Biden being replaced as the Democrats’ presidential nominee by someone less pro-crypto after a shaky debate performance with rival candidate Donald Trump.

“What’s striking about this slide in Bitcoin is it comes as U.S. stocks and global equity indexes rest at or near record highs – the correlation between Bitcoin and mainstream equities is fraying,” said Antoni Trenchev, co-founder of crypto platform Nexo.

Bitcoin had a strong start to the year following the launch of exchange-traded funds in the U.S., which propelled it to a record $73,803.25 in mid-March. However, it has struggled since then.

“With an asset that has been rangebound for quite a while and recently in the lower end of that range, there are plenty of margined positions,” said Justin D’Anethan at digital assets market maker Keyrock. “This of course creates a cascading effect, pushing prices further down than it might in a market with less leverage.”

The decline in Bitcoin’s price underscores the volatility and challenges in the cryptocurrency market. The potential influx of tokens from Mt. Gox and the impact of leveraged selling continue to weigh heavily on traders’ minds, highlighting the ongoing uncertainty and risks associated with digital assets.