A third-straight daily slide in Bitcoin took the digital asset close to levels last seen in February amid challenges including US political drama and the potential for disposals by creditors of the failed Mt Gox exchange.
The largest cryptocurrency fell as much as 2.7 per cent on Thursday before paring some of the drop to trade 1 per cent lower at $58,875 as of 12:22 p.m in Singapore. Smaller tokens such as Solana and meme-crowd favorite Dogecoin also sank.
Investors across global markets are gaming out scenarios in case 81-year-old President Joe Biden succumbs to calls to scrap his US reelection bid. One possibility is that a stronger Democratic contender emerges to make life tougher for Republican Donald Trump, whose agenda favors the crypto industry.
Mt. Gox’s administrators, meanwhile, are returning more than 137,000 Bitcoin to creditors in stages. Traders are uncertain about how much of the $8 billion haul will end up being sold and separately weighing the risk of disposals of seized Bitcoin by the US and German governments.
“The likelihood of a stronger Democratic candidate replacing Biden who might not be pro-crypto is a factor,” said Richard Galvin, co-founder of hedge fund Digital Asset Capital Management. “A bigger reason in the short term for the Bitcoin weakness is the overhang from Mt. Gox, and government selling.”
Struggling Miners
The operators of the power-hungry computers that underpin the Bitcoin blockchain are continuing to absorb the financial hit of April’s so-called halving, which curbed the new tokens they receive for the work they do. One response from these Bitcoin miners is to sell some of their inventory of tokens.
“Bitcoin continues to battle with selling pressure from miners,” wrote Noelle Acheson, author of the Crypto Is Macro Now newsletter.
Sentiment can turn quickly in crypto, for instance if weaker US economic data spur bets on looser Federal Reserve monetary policy. Pending approvals for US exchange-traded funds investing in No. 2 token Ether could lift the mood too.
The interpretation of US political developments may also shift. Bitwise Asset Management Inc. Chief Investment Officer Matt Hougan argued that potential turnover at the top of the Democratic ticket is “more likely than not to settle out in an improved place for crypto.” He said Washington’s attitude to digital assets has improved overall in the past year.
Speculators are now scouring Bitcoin charts to see if closely-watched technical levels hold or subside. The cryptocurrency just closed below an approximation of its six-month moving average price. Such breaches presage more losses if history is any guide, data compiled by Bloomberg show.