Summary
Bitcoin is experiencing its largest weekly fall in nearly a year, driven by concerns over potential token dumping from the defunct Mt. Gox exchange and selling by leveraged traders. The cryptocurrency dropped as much as 8% in a single day, reaching its lowest level since February, and is on track for a 10% weekly decline. Ether also saw significant drops, hitting a two-month low. Market analysts cite the upcoming repayments to Mt. Gox creditors, who are likely to sell their Bitcoin, as a primary cause of the downturn. This movement marks the first on-chain transfer of funds from Mt. Gox in over five years, aiming to repay creditors by October 2024.
Bitcoin was on track for its most significant weekly fall in nearly a year as of Friday, with traders anxious about the potential dumping of tokens from the defunct Japanese exchange Mt. Gox and additional selling by leveraged players after the cryptocurrency’s recent strong run.
Bitcoin Drops to Lowest Level Since February
The price of Bitcoin, the world’s largest cryptocurrency, dropped by as much as 8% in a single day to $53,523, its lowest since late February. It was last trading at $56,565, marking a decline of over 3% for the day. For the week, Bitcoin was headed for a more than 10% decline, its largest since August 2023.
Ether Follows Bitcoin’s Downward Trend
Ether, the second-largest cryptocurrency, also saw a significant drop, hitting a two-month low of $2,822.30. It was last at $2,976.62, down 5.28%.
Mt. Gox Repayment Fears Trigger Market Sell-Off
Media reports indicated that Mt. Gox, once the world’s leading cryptocurrency exchange before its collapse a decade ago, might start returning Bitcoin to creditors. These creditors are expected to sell since the token’s value was just a few hundred dollars in 2014. Tony Sycamore, a market analyst at IG, commented, “The selling pressure is still related to creditor selling from the failed Mt Gox exchange.” He added that the market’s downturn suggested traders were trying to get ahead of these creditor flows.
Largest Daily Liquidations Since FTX Collapse
The downward movement in Bitcoin also triggered the largest daily liquidations for crypto traders since the collapse of the FTX exchange in 2022, according to a research note from crypto trading firm Wintermute. Analysts have also pointed to concerns over the possibility of Joe Biden being replaced as the Democratic presidential nominee by someone less supportive of cryptocurrencies, following a shaky debate performance against rival candidate Donald Trump.
Bitcoin and Mainstream Equities Correlation Weakens
Antoni Trenchev, co-founder of crypto platform Nexo, noted, “What’s striking about this slide in Bitcoin is it comes as U.S. stocks and global equity indexes rest at or near record highs – the correlation between Bitcoin and mainstream equities is fraying.”
Bitcoin’s Record Highs and Recent Struggles
Bitcoin’s strong start to the year was bolstered by the launch of exchange-traded funds in the U.S., pushing its price to a record $73,803.25 in mid-March. However, it has struggled to maintain those highs. Justin D’Anethan at digital assets market maker Keyrock explained, “With an asset that has been rangebound for quite a while and recently in the lower end of that range, there are plenty of margined positions. This, of course, creates a cascading effect, pushing prices further down than it might in a market with less leverage.”
Mt. Gox Transfers $9.62 Billion Worth of Bitcoin
Meanwhile, Mt. Gox’s movements in Bitcoin have been significant. The collapsed exchange recently transferred $9.62 billion worth of Bitcoin into a new wallet, raising hopes among creditors who have been unable to access their funds since Mt. Gox suspended trading and withdrawals in 2014. This transfer, involving 141,686 Bitcoin, is part of Mt. Gox’s plans to repay creditors by the end of October 2024. This movement marks the first on-chain transfer of funds from Mt. Gox in over five years, suggesting that the long-awaited repayments to creditors are imminent.
Trustee Confirms Repayment Plans Amid Bitcoin Consolidation
Nobuaki Kobayashi, the rehabilitation trustee for Mt. Gox, confirmed that the consolidation is part of the repayment plans, though he did not specify when repayments would begin. The current deadline for these repayments is October 31, 2024, though it may face further delays. Mt. Gox, which once handled over 70% of all Bitcoin transactions globally, collapsed in 2014 after multiple hacks, affecting around 127,000 creditors.
Market Reaction to Mt. Gox Transfers and Future Implications
The market’s response to these developments has been cautious, with Bitcoin prices experiencing slight dips due to expectations of selling pressure from creditors once they receive their repayments. Despite these fluctuations, resolving the Mt. Gox issue could address one of the cryptocurrency market’s longest-standing problems.
