Title: Mt.Gox Announcement Triggers Cryptocurrency Market Drop
Article:
In a surprising turn of events, the cryptocurrency market experienced a significant blow with the release of a seemingly innocuous document.
During the European trading session today, Bitcoin suffered a sudden drop of 2.4% within just one hour, briefly approaching the crucial $60,000 level. At its lowest point, it dipped to $60,500. Similarly, Ethereum also experienced a nearly 3% decrease within the same hour, with a low of $3,240. This downturn led to a general decline in the cryptocurrency market, with altcoins, including the previously high-performing Rats, losing almost all of their overnight gains, resulting in widespread losses of over 10%.
According to Coinglass data, the market crash resulted in a total of $105 million worth of liquidations within one hour, with $103 million in long positions and $1.94 million in short positions. Bitcoin liquidations amounted to $41.14 million, while Ethereum liquidations reached $31.39 million.
In pre-market trading, blockchain-related stocks in the US also experienced a decline, with Coinbase dropping 7.26%, Microstrategy falling 5.19%, and Riot Platform decreasing by 3.66%.
The main culprit behind this market upheaval is none other than Mt.Gox.
Mt.Gox Begins Repayment Process
According to recently disclosed official website documents, the Mt.Gox trustee announced the commencement of the repayment process for BTC and BCH from early July. The necessary preparations have already been completed, including the exchange of required information with relevant exchanges.
Due to the substantial amount to be repaid, Mt.Gox plans to reimburse creditors with a total of 142,000 BTC (equivalent to approximately $8.72 billion) and 143,000 BCH (worth $50.765 million), resulting in a total market sell-off pressure of around $8.77 billion. Upon the announcement of this news, the market started to decline.
At a time when market liquidity is low and without sufficient buying pressure, the injection of billions of dollars’ worth of selling pressure further exacerbated the already panicky market, leading many to exit the market to wait and see.
In fact, as early as May 28, a decade after declaring bankruptcy, the dormant Mt.Gox wallet, which had been inactive for five years, suddenly showed activity with ten transactions transferring 141,685 bitcoins to an unknown address.
Will the Selling Pressure be Released All at Once?
Mt.Gox had already considered the market risks associated with such a massive sell-off.
According to an announcement on the Mt.Gox official website, the repayment plan offered to creditors includes a basic repayment and a proportional repayment. The basic repayment allows for the first ¥200,000 ($1,818) per claim to be paid in Japanese yen, while the proportional repayment provides creditors with two flexible options: an early lump sum payment or midterm and final payment.
Opting for the lump sum payment will result in receiving only a partial payout, with amounts exceeding ¥200,000 eligible for a mix of BTC, BCH, and yen, or payment in fiat currency. Choosing midterm and final payments will yield higher compensation but may take several years to complete. The payment options also include both cash and cryptocurrency.
Overall, this decentralized repayment approach aims to mitigate the significant market downturn caused by concentrated sell-offs.
Additionally, due to the extended duration since the bankruptcy, a considerable portion of creditors have sold their claims to funds. Considering the potential interest rate cut at the end of the year, some funds may not immediately sell their holdings.
Future Outlook
Historically, the months following the Bitcoin halving event have been characterized by a period of stagnation in the market.
Andrei Grachev, a partner at DWF, stated that since 2017, altcoins’ market share has remained around 14.45%. Google search volume has been declining since March 2024. A stable BTC signifies confidence, but BTC cannot currently rise 50 times, while altcoins can. If Bitcoin maintains a stable level, there may be a wave of altcoin bull markets in the coming months.
Markus Thielen, the founder of 10x Research, suggested that from a technical perspective, Bitcoin appears to be following a double top pattern and is currently testing support levels. Unless this pattern fails, it should be our working hypothesis. This pattern could easily lead to a BTC price drop to $50,000 or even $45,000. The US presidential election and the consumer price index later this year should be positive factors, but significant price corrections may still occur.
