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Bitcoin Briefly Drops to $9,000: Factors Behind the Decline

Last Updated March 4, 2021 5:05 PM
Joseph Young
Last Updated March 4, 2021 5:05 PM

On March 8, the price of bitcoin dropped to $9,000, after reaching $11,000 merely 48 hours ago. Analysts have attributed three major factors to the decline in the price of bitcoin: Mt. Gox sell off, SEC announcement, penalization of Japanese exchanges.

Mt. Gox Trustee Sell-Off

According to the official document released by the Mt. Gox trustee, a total of $404 million worth of bitcoin and Bitcoin Cash have been sold over the past few months, at a price determined by the trustee, which is significantly lower than the current market value of bitcoin and Bitcoin Cash.

“As a result of the consultation with the court, I considered it necessary and reasonable to sell a certain amount of BTC and BCC at this point and secure a certain amount of money for distribution resources, and thus, I sold the amount of BTC and BCC above. I made efforts to sell BTC and BCC at as high a price as possible in light of the market price of BTC and BCC at the timing of sale. I plan to consult with the court and determine further sale of BTC and BCC,” the document read.

In the next few months, the trustee intends to liquidate the remaining assets, which are 166,344.35827254 bitcoins, worth around $1.7 billion based on the current value of bitcoin.

It is likely that the planned sell-off of over a billion dollars worth of bitcoin has caused a domino effect on many cryptocurrency exchanges, leading to the decline in the value of bitcoin and other cryptocurrencies as a consequence.

SEC’s Announcement

This week, the US Securities and Exchange Commission (SEC) announced that cryptocurrency exchanges that have listed initial coin offerings (ICOs) or tokens on their platforms are required to register with the agency in order to continue providing support for ERC20 tokens.

As CCN.com reported, Ripple CEO Brad Garlinghouse stated that the market overreacted to the announcement of the SEC, given that cryptocurrency exchanges have simple options to comply with the SEC: de-list ICO tokens or register with the agency.

Garlinghouse added that there exists no uncertainty regarding the announcement of the SEC, as he noted: 

In context of yesterday’s SEC statement(s), I hear some in crypto talk about the current ‘regulatory uncertainty.’ What’s uncertain? SEC’s statements have been consistent and clear. ‘Regulatory uncertainty” is just a euphemism for ‘we wish we could ignore SEC regulations.’”

Andreas Antonopoulos, a well-respected cryptocurrency and security expert, emphasized that the SEC and other federal agencies tightening regulations for ICOs was expected. Antonopoulos explained: 

“The recent SEC & FinCEN statements are not unexpected. I have been warning people about the potential risks (technical, financial, and legal) of engaging with ICOs for years.”

Japan’s Cryptocurrency Exchange Penalization

As Tokyo-based technology reporter Yuji Nakamura reported , the Japanese government recently penalized four cryptocurrency exchanges and revoked the licenses of two trading platforms for poor security and failing to meet Anti-Money Laundering (AML) and Know Your Customer (KYC) policies.

Given that Japan still remains as the largest bitcoin exchange market with over 51 percent of the market share, analysts stated that the crackdown on small exchanges have had an impact on the global cryptocurrency market.