Reasons Behind the Bitcoin and Ethereum Price Decline
The crypto market recently saw a significant downturn in its overall market value as prices took a sharp nosedive over the weekend. Notably, Bitcoin, the top cryptocurrency by market cap, dropped below the $60,000 threshold on Saturday, August 3. Ethereum, the second-largest digital currency, also suffered substantial losses, slipping below $3,000 and hitting a low of $2,860, leading to a domino effect on other cryptocurrencies, most of which were in the red.
Volatility is a common occurrence in the crypto sphere, with prices often experiencing drastic fluctuations in response to various factors. These price swings are typically a result of market reactions to recent news or events. In this particular case, the recent price drops can be linked to the repayment plans of bankrupt crypto lender Genesis Global Capital.
Genesis Global Capital, a crypto lender that had faced bankruptcy, has completed its restructuring process and is now in the phase of repaying its debts to creditors after a three-year period. According to reports from Bloomberg, the lender has commenced distributing approximately $4 billion in cryptocurrencies and fiat currencies to its creditors. The distribution breakdown reveals that Bitcoin creditors will receive 51.28% of their claims, Ethereum creditors will get 65.87%, and Solana creditors will only receive 29.58% of their claims.
In a significant move, Genesis transferred over $1.5 billion in Bitcoin and Ethereum on Friday, triggering market volatility. Data from Arkham Intelligence shows that the firm moved a total of $1.5 billion, including 16,600 BTC (equivalent to around $1.1 billion) and 166,300 ETH (approximately $521.1 million). Among the recipients of these repayments was billionaire Mark Cuban, who received $19.9 million worth of Ethereum.
Market participants seemed to react to the influx of new funds by selling off their holdings, contributing to the decline in the prices of many cryptocurrencies that were already struggling. The price drop could also be linked to creditors cashing out their digital assets after a prolonged wait of three years, further intensifying the selling pressure and exacerbating the price decrease.
Consequently, the crypto market witnessed a sharp decline, with a more than 5.7% drop within a 24-hour period, bringing the market capitalization down to $2.15 trillion. Bitcoin fell below $60,000, while Ethereum dipped below $2,900. Genesis Global Capital is not alone in its creditor repayment efforts among bankrupt crypto firms, as Mt. Gox, a bankrupt Bitcoin exchange, has also been repaying its creditors in recent weeks. The market may continue to react to these substantial fund movements as creditors receive their repayments.
The featured image is sourced from 123RF, and the chart is from TradingView.
