Bitcoin falls further amid sell pressure from German government exchange transfers and Mt. Gox payouts

Bitcoin's price has fallen further over the past 24 hours as Mt Gox payouts and the German government's transfers of BTC to crypto exchanges have rattled markets.

"Equities and gold have been bouncing higher from the start of last week but bitcoin prices have gone the other way," QCP Capital analysts said.

Bitcoin has been beset by selling pressure amid anticipation of asset offloading from Mt Gox payouts and the German government making transfers of its seized BTC haul to exchanges. The largest digital asset by market cap has slid over 2% in the past day. QCP Capital analysts observe that bitcoin prices are continuing "to chop violently on very thin liquidity." Bitcoin is now changing hands for $56,216 at 11:05 a.m. ET., according to The Block's Bitcoin Price Page.

Sell-pressure factors hit bitcoin prices

According to blockchain analytics platform Arkham, the German government transferred 133.722 bitcoins to market maker Cumberland DRW Monday morning. In the past day, Arkham data shows that the German government wallet has sent 1,250 bitcoin to crypto exchange Kraken, 2,050 bitcoin to Coinbase,  2,350 bitcoin to Bitstamp, and 5,200 bitcoin to market maker Flow Traders.

Adding to the bitcoin selling pressure is news that crypto exchange Bitstamp will aim to distribute its portion of bitcoin repayments to Mt. Gox creditors swiftly, even though it has up to 60 days to do so once it receives the coins.

"According to the agreement with the Mt. Gox trustees, Bitstamp has 60 days to distribute the tokens, though we are of course working to make sure those investors are made whole as soon as possible," the exchange said in a statement.

Equity indices rally on soft landing anticipation

In contrast to the bitcoin downturn, equity market participants seemed willing to take on more risk in their investment decisions in early trading on Monday. The S&P 500 gained 0.14%, while the Dow Jones Industrial Average climbed 168.32 points, or 0.43%. The tech-heavy Nasdaq Composite advanced 0.17%. As well, major European equity indices were also green. The European Stoxx 600 index increased 1.03 points to 517.63, an increase of 0.2%. In London, the FTSE 100 increased slightly, up 1.51 points to 8,205.44.

The buoyant mood in equities comes as fixed income traders notched up the chances of a rate cut in September from 71% at the end of last week to 72.5%, according to the Chicago Mercantile Exchange (CME) FedWatch tool. Analysts are now pointing to indicators signaling the U.S. economy could achieve a soft landing by the end of 2024. "We remain optimistic that policymakers will aim for soft economic landings toward the year's end," Ryze Labs analysts said in an email sent to The Block.

BRN analyst Valentin Fournier added that he expects U.S. Consumer Price Index (CPI) numbers this week to align with the recent Personal Consumption Expenditures (PCE) reading and to show further signs of disinflation in the U.S. As for pricing in a potential September rate cut into the bitcoin market, Fournier added in a note sent to The Block, "the bottom is either behind us or it is very close."

Concern over potential bubble in the equity market 

However, given that equity index gains are being led by firms linked to artificial intelligence (AI), some market observers are becoming increasingly wary of a potential bubble in the equity market, driven by concerns over AI's ability to generate consistent revenue. Drawing parallels to the dot-com bubble of the late 1990s, when the Nasdaq skyrocketed before a devastating crash, venture capital firm Sequoia highlighted the crucial need for AI to prove its return on investment (ROI).

According to Sequoia, the AI ecosystem must generate approximately $600 billion in revenue to justify the massive investments in GPUs and data centers essential for AI development. Despite the substantial market capitalization gains seen in tech giants associated with AI, such as Microsoft, revenue figures from AI ventures like OpenAI fall short of these targets.

According to Sequoia, this disparity raises doubts about the sustainability of current valuations, especially as most users benefit from AI services without significant spending, undermining the financial justification for these investments.