BTC Briefly Dips Below $59,000 as Market Might Overreact to Mt. Gox Selling Pressure
The crypto market is facing significant selling pressure after the trustee of Mt. Gox’s bankruptcy estate announced that Bitcoin (BTC) and Bitcoin Cash (BCH) would be returned to creditors starting in July.
Over 140,000 BTC and BCH will be distributed to creditors. This news caused Bitcoin to briefly drop below $59,000, and as of the latest update, it has recovered to $59,962, marking a nearly 6% decline in 24 hours.
Altcoins followed Bitcoin’s downward trend, with most of the top 200 tokens by market cap falling.
Among the gainers, Mog Coin (MOG) led with a 16.4% increase, followed by Lido DAO (LIDO) up 8.2%, and UNUS SED LEO (LEO) up 6.4%. ORDI (ORDI) led the decliners, down 14%, followed by Echelon Prime (PRIME) down 11.8%, and Uniswap down 11.7%.
The current total market cap of cryptocurrencies is $2.21 trillion, with Bitcoin’s market dominance at 53.2%.
Mt. Gox Selling Pressure Might Be Smaller Than Expected
The Mt. Gox repayment, which has been a decade in the making, is a significant event in the crypto world. Mt. Gox was hacked in 2014, with over 940,000 BTC stolen from more than 127,000 accounts. The exchange declared bankruptcy, and creditors have been unable to fully recover their funds until now.
In May this year, the exchange moved 141,686 BTC (worth $9.62 billion) to a new wallet, “1Jbez,” causing a market stir and brief panic. Some industry insiders warned of an imminent large-scale market sell-off, as this was the first on-chain transfer from Mt. Gox-related cold wallets in over five years.
Repayment trustee Nobuaki Kobayashi, in a recent statement, emphasized that Mt. Gox has taken additional time and due diligence to ensure safe and reliable repayment to creditors. This includes technical measures for secure repayment, compliance with financial regulations in various countries, and discussions with crypto exchanges regarding repayment arrangements.
The statement urged creditors to be patient, noting that the repayment speed would depend on the chosen repayment method, which involves coordination with other crypto exchanges.
Some experts suggest that the selling pressure from Mt. Gox might be smaller than anticipated.
Galaxy Research head Alex Thorn stated that the expected selling volume when Mt. Gox’s Bitcoin enters the market will be lower than implied by headlines. He analyzed that only 65,000 BTC would be distributed to individual investors.
On X, Thorn explained: “To receive an immediate payout (known as an early lump sum), creditors accepted about a 10% haircut (forfeiting 10%). We estimate approximately 75% of the BTC was used for this option, leaving about 95,000 tokens for early payouts. Of these, about 20,000 tokens go to the claims fund, about 10,000 tokens to Bitcoinica BK, leaving about 65,000 tokens for individual creditors. This 65,000 BTC/BCH is far less than the 141,868 tokens reported in the media.”
For the claims fund, Thorn noted that most partners in these funds are high-net-worth Bitcoin holders rather than arbitrageurs seeking quick profits.
He concluded: “Therefore, I believe the distributed token quantity is below market expectations, and once these tokens are distributed, BCH will perform worse than BTC, as a large portion will be sold in a less liquid market.”
Some analysts and early crypto investors who have been involved with Mt. Gox since its inception also indicate that despite the trustee’s announcement, repayments might still face further delays. The exchange initially planned to start repayments in October 2023 but postponed the plan in September 2023.
Crypto trader Pat noted that FUD and pullbacks related to Mt. Gox are not new to the crypto market, as similar pullbacks have occurred the last three times this event made headlines, but Bitcoin eventually moved higher.
Latest Weakness May “Resolve Itself”
Bitfinex analysts indicated that the crypto market is currently in a state of uncertainty as it nears higher timeframe lows on daily, weekly, and monthly charts, while lower timeframes (one-minute to 15-minute charts) also show downward trends.
They also noted that outflows from US-listed spot Bitcoin ETFs have exacerbated negative sentiment, with total outflows last week reaching $544.1 million. However, they mentioned that this is related to basis/roll arbitrage unwinding and not necessarily real sentiment about BTC.
Bitfinex analysts stated: “As previously noted, large-scale ETF sell-offs typically correspond with local bottoms in BTC prices. Consequently, the overall crypto market cap has dropped. Historically, this magnitude of volatility usually signals at least a local low, as seen on June 11, when a similar intraweek drop led to a new local price bottom. Thus, there are potential buying opportunities, and these sharp declines warrant close attention from traders.”
Bitfinex concluded: “However, we believe the market is in a wait-and-see mode, likely to witness continued oversold pressure on BTC in the short term and a lack of catalysts to push prices higher. Alternatively, an ETH ETF approval could spark new positive sentiment, particularly among altcoins.”
Off the Chain Capital CEO Brian Dixon advised crypto investors to exercise patience, waiting for the latest round of weakness to “resolve itself.”
In a report, Dixon noted:
Historically, even in bull markets, Bitcoin sees 4-5 drops per year of 20-30%. So, in my view, there’s nothing to worry about with this correction. In the 2017 bull market, Bitcoin fell 20-30% ten times but still hit new all-time highs. In the 2020-2021 bull market, Bitcoin fell 20-30% four times but still achieved new all-time highs.
Dixon