Crypto markets faced heavy selling pressure after the trustee of the Mt. Gox bankruptcy estate announced that it would begin returning Bitcoin (BTC) and Bitcoin Cash (BCH) to creditors in July.
More than 140,000 BTC and BCH will be distributed to creditors. Affected by this news, Bitcoin once fell below $59,000 during the session. As of press time, the trading price rebounded to $59,962, a 24-hour drop of nearly 6%.
Altcoins followed Bitcoin's decline, with the top 200 tokens by market cap falling more than they rose.
Among the rising coins, Mog Coin (MOG) led the gains, up 16.4%, followed by LidoDAO (LIDO) up 8.2%, and UNUS SED LEO (LEO) up 6.4%. ORDI (ORDI) led the decline, down 14%, Echelon Prime (PRIME) down 11.8%, and Uniswap down 11.7%.
The current overall market value of cryptocurrencies is $2.21 trillion, and Bitcoin’s market share is 53.2%.
Mt.Gox sell-off may be smaller than expected
The decade-long Mt. Gox repayment saga is a major event in the cryptocurrency space. Mt. Gox was hacked in 2014, with more than 940,000 bitcoins stolen from more than 127,000 accounts. The exchange subsequently filed for bankruptcy, and creditors were unable to recover their funds in full until the bankruptcy case entered legal proceedings.
In May, the exchange transferred 141,686 bitcoins (worth $9.62 billion) to a new wallet called “1Jbez,” sparking a stir and brief panic in the market, with some industry insiders warning that a massive market sell-off was imminent as it was the first time funds from a Mt. Gox-linked cold wallet had been transferred on-chain in more than five years.
In its latest statement, repayment trustee Nobuaki Kobayashi noted that Mt. Gox has invested extra time and due diligence "to ensure safe and secure repayment to creditors, including technical remedies for safe repayment, compliance with financial regulations in various countries, and discussions with cryptocurrency exchanges on repayment arrangements."
The statement called on creditors to remain patient and said the speed of repayment would depend on the repayment method chosen, which would include coordination with other cryptocurrency exchanges.
Some experts note that the selling pressure from Mt. Gox may be less than expected.
Alex Thorn, head of research at Galaxy Research, said the expected volume of sales from the Mt. Gox bitcoins entering the market will be lower than suggested by headlines, with his analysis suggesting only 65,000 bitcoins will be distributed to individual investors.
Alex Thorn said on the X platform: "In order to get immediate compensation (so-called early compensation), creditors accepted a reduction of about 10% (10% is not needed). We believe that about 75% of BTC was used for this option, leaving about 95,000 tokens for early compensation, of which about 20,000 tokens belong to the claims fund and about 10,000 tokens belong to Bitcoinica BK, leaving about 65,000 tokens for individual creditors. 65,000 BTC/BCH is far less than the 141,868 claimed by the media."
As for the claims funds, Thorn said the vast majority of partners in these funds are high-net-worth Bitcoin holders, not arbitrageurs looking for a quick profit.
“So I think the number of tokens distributed is lower than the market expects, and I think once those tokens are distributed, BCH will perform worse than BTC, with a large portion being sold by creditors into less liquid markets,” he concluded.
Some analysts and early crypto investors who have been involved in Mt. Gox since its inception also said that despite the announcement by the Mt. Gox trustee, repayments could face further delays, as the exchange was scheduled to begin repayments in October 2023 but announced a postponement in September 2023.
Crypto trader Pat believes that the FUD and pullbacks related to Mt. Gox are nothing new to the crypto market, as similar pullbacks occurred three times in the past when the incident made headlines, but Bitcoin eventually went higher.
Latest bout of weakness may “solve itself”
Bitfinex analysts said the cryptocurrency market is currently “in a state of uncertainty as lower lows are being approached on the daily, weekly, and monthly charts on higher timeframes, while there is also a downtrend on lower timeframes (one-minute to 15-minute charts).”
They also noted that outflows from U.S.-listed spot Bitcoin ETFs “exacerbated negative sentiment, with outflows totaling $544.1 million last week, though this was related to basis/capital carry unwinding and not necessarily true sentiment around BTC.”
Bitfinex analysts said: “As mentioned earlier, large-scale ETF sell-offs are usually associated with local bottoms in BTC prices. As a result, the total cryptocurrency market capitalization declines. Historically, fluctuations of this magnitude often foreshadow at least local lows, as was the case on June 11, when a similar intra-week decline led to the formation of a new local price floor. Therefore, there are potential buying opportunities, and these large declines are worth traders' close attention.”
“However, we believe the market is in wait-and-see mode, with the short term seeing either continued pressure from excess BTC selling and a lack of any catalysts to drive prices higher, or an ETH ETF getting approved and sparking renewed positive sentiment, especially in altcoins,” Bitfinex concluded.
Brian Dixon, CEO of Off the Chain Capital, said what cryptocurrency investors really need is patience and waiting for the latest round of weakness to "work itself out."
“Historically, even in bull markets, Bitcoin has fallen 4-5 times per year by 20-30%, so in my opinion, this correction is nothing to worry about,” Dixon said in a report. “During the 2017 bull run, Bitcoin fell 20-30% 10 times and still hit all-time highs. During the 2020-2021 bull run, Bitcoin fell 20-30% 4 times and still hit all-time highs.”
