Is Mt. Gox really the cause of this fall, or is it just a catalyst for it?
289 billion has left the crypto market in the last five days, in the midst of the current bearish cycle. On a percentage basis, the above figure results in an 11.9% decline in total capitalization, as on July 1, the crypto market boasted a capitalization of $2.419 trillion and today it has recently fallen to $2.13 trillion.
In terms of capitalization, this decline is led by bitcoin, which has fallen to $53,900, its lowest level in four months, not seen since February.
Meanwhile, altcoins have seen a 15.8% drop in market capitalization over the past month, with most of them seeing double-digit declines.
However, the hardest hit market is memecoins, which at the time of writing is down 11.9% in the last 24 hours. It is one of the most volatile sectors at the moment (as it usually is).
As most of the media headlines about this fall, the predominant news is that the crypto market is deeply affected by the payout of funds by Mt. Gox and multi-million transactions to exchanges.
Chart Analysis: The Reasons Behind the Slump Few Are Talking About
Although Mt. Gox’s payout of BTC could lead to massive sell-offs that dampen the spirits of buyers, what the chart of the total cryptocurrency market capitalization tells us is that it has already been declining for the past month.
In fact, since the beginning of June, the total capitalization of cryptocurrencies has been falling in a downtrend line, which was broken in the latest moves.
Prior to the downward moves, the market cap was moving in a more or less sideways line from the March highs. Then, the BTC price experienced two major events that may be behind today’s decline catalyzed by the Mt. Gox news. This refers to the continued rejection of $70,000. As the price failed to break or hold above that level, it can be seen that the declines become steeper and steeper.
However, and abandoning the abstraction of charts, it can be assumed that the cryptocurrency market has been showing signs of weakness since early June, with a gradual decline in total market value. Before that, the capital inflow stagnated at one point, to later start a gradual decline and today present an abrupt capital outflow, i.e. a pronounced fall due to Mt. Gox.
Macroeconomic Factors: The Real Culprits
Beyond the total crypto market capitalization and the news making headlines in the crypto media, July does not bring any improvement in macroeconomic figures that are important for cryptocurrencies.
On Wednesday, for instance, the U.S. Federal Reserve released the minutes of its June meeting, which showed the low probability of interest rate cuts, as the target for inflation to fall back to 2% is still quite far away.
Analysts are expecting a significant drop in interest rates, allowing for a large influx of capital into the crypto market. However, given the developments, it seems that this will not happen until next year.
All in all, it appears that unless the macroeconomic environment improves and there is a significant decline in US inflation, the crypto market will be quite vulnerable to events such as the Mt. Gox payout.
By Leonardo Perez
