BTC short-term fell below 59,000 USD, and the market may have "overreacted" to the selling pressure from Mt.Gox

Author: Mary Liu, BitpushNews

After the trustee of Mt. Gox announced that it would start returning Bitcoin (BTC) and Bitcoin Cash (BCH) to creditors in July, the crypto market is facing significant selling pressure.

Over 140,000 BTC and BCH will be distributed to creditors. Following this news, Bitcoin briefly fell below $59,000 during trading, and as of the time of writing, the trading price has rebounded to $59,962, with a 24-hour decline of nearly 6%.

Altcoins followed Bitcoin's decline, with tokens in the top 200 by market capitalization mostly down.

Among the coins that rose, 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 decline, down 14%, Echelon Prime (PRIME) down 11.8%, and Uniswap down 11.7%.

The current overall market capitalization of cryptocurrencies is $2.21 trillion, with Bitcoin's market share at 53.2%.

Mt. Gox Selling Pressure May Be Smaller Than Expected

The ten-year Mt. Gox repayment event is a significant event in the cryptocurrency space. Mt. Gox was hacked in 2014, with over 127,000 accounts losing more than 940,000 Bitcoins. The exchange subsequently filed for bankruptcy, and creditors have been unable to recover their funds in full before the bankruptcy case entered legal proceedings.

In May of this year, the exchange transferred 141,686 Bitcoins (worth $9.62 billion) to a new wallet "1Jbez," causing a stir in the market and brief panic, with some industry insiders warning that a large-scale market sell-off was imminent, as this was the first time in over five years that funds associated with Mt. Gox's cold wallet were moved on-chain.

The repayment trustee Nobuaki Kobayashi stated in a recent announcement that Mt. Gox has invested additional time and due diligence "to ensure the safe and reliable repayment to creditors, including technical remedies for secure repayment, compliance with financial regulations in various countries, and discussions with cryptocurrency exchanges regarding repayment arrangements."

The statement urged creditors to be patient and indicated that the speed of repayment would depend on the chosen repayment method, which includes coordination with other cryptocurrency exchanges.

Some experts pointed out that the selling pressure from Mt. Gox may be smaller than expected.

Alex Thorn, head of research at Galaxy, stated that the expected sell-off volume of Bitcoin entering the market from Mt. Gox will be lower than the numbers implied in the headlines, analyzing that only 65,000 Bitcoins will be distributed to individual investors.

Alex Thorn stated on the X platform: "To receive immediate compensation (the so-called early compensation), creditors accepted a write-down of about 10% (10% is not needed). We believe about 75% of the BTC is used for this option, leaving about 95,000 tokens for early compensation, of which about 20,000 tokens belong to the claims fund, about 10,000 tokens belong to Bitcoinica BK, leaving about 65,000 tokens for individual creditors. 65,000 BTC/BCH is far lower than the 141,868 claimed by the media."

For the claims fund, Thorn noted that the vast majority of partners in these funds are high-net-worth Bitcoin holders rather than arbitrageurs seeking quick profits.

He concluded: "Therefore, I believe the number of tokens distributed will be lower than the market expects, and I think that once these tokens are distributed, BCH will perform worse than BTC, with a significant portion being sold by creditors into less liquid markets."

Some analysts and early crypto investors who have been involved since Mt. Gox's inception also indicated that despite the announcement from the trustee, repayments may still face further delays, as the exchange was originally scheduled to start repayments in October 2023 but announced a postponement in September 2023.

Crypto trader Pat believes that the FUD and pullbacks associated with Mt. Gox are not new to the crypto market, as similar pullbacks occurred during the past three times this event made headlines, but ultimately Bitcoin still rose.

The Latest Round of Weakness May "Self-Resolve"

Bitfinex analysts stated that the cryptocurrency market is currently "in a state of uncertainty, as it approaches lower points on daily, weekly, and monthly charts, while there is also a downward trend on lower time frames (one minute to 15 minutes)."

They also noted that the outflow of funds from the U.S.-listed spot Bitcoin ETF "has exacerbated negative sentiment, with total outflows last week reaching $544.1 million, although this is related to basis/funding arbitrage liquidations rather than necessarily the true sentiment regarding BTC."

Bitfinex analysts stated: "As mentioned earlier, large-scale sell-offs of ETFs are often associated with local bottoms in BTC prices. Therefore, the total market capitalization of cryptocurrencies has declined. Historically, such magnitude of volatility typically signals at least a local bottom, as seen on June 11, when a similar weekly decline led to the formation of a new local price bottom. Thus, there are potential buying opportunities, and these significant drops are worth traders' close attention."

Bitfinex concluded: "However, we believe the market is in a wait-and-see mode, and in the short term, we will either see continued pressure from overselling of BTC, with a lack of any catalysts to drive prices up; or we will see ETH ETF approval triggering new positive sentiment, especially in altcoins."

Brian Dixon, CEO of Off the Chain Capital, stated that cryptocurrency investors really need patience, waiting for the latest round of weakness to "self-resolve."

Dixon stated in a report: "Historically, even in bull markets, Bitcoin experiences 4-5 declines each year, with drops of 20-30%. Therefore, in my view, there is nothing to worry about with this adjustment. During the bull market of 2017, Bitcoin fell 20-30% as many as 10 times, yet still reached new all-time highs. In the bull market of 2020-2021, Bitcoin fell 20-30% 4 times, yet still reached new all-time highs."