Mt. Gox fear drives slow summer
Each day, Coinrule will run through the state of the digital assets market for Blockbeat, your home for news, analysis, opinion and commentary on blockchain and digital assets.
The 2024 bull market has run out of steam. Bitcoin, initially driven upwards by strong ETF flows and momentum around its halvening, is gradually retreating from its briefly crossed All Time High price. Altcoins have so far mostly experienced a disappointing market environment in 2024. Other than a short-lived memecoin craze, most projects have seen their prices steadily decline since earlier in the year. Especially the low trading volumes in the market signal the slowdown. Currently, BTCUSDT, the most liquid trading pair, regularly sees days with volumes of less than $10 billion, compared to 3-4x the traded amount earlier in the year.
One of the bigger catalysts that could potentially imply even more downside is the upcoming unlock of 142,000 Bitcoin, approximately $8.6 billion, due to Mt. Gox repayments. Trustees of Mt. Gox, the exchange hacked in 2014, announced that repayments to users will start in July this year. The long-awaited event will provide capital to market participants at over 100x return. When the exchange went under, the price of a Bitcoin was hovering just below $500. Since customers will be repaid in-kind, a lot of early Bitcoin buyers are in for a large payout.
An unknown variable in this case is how many of the claims were sold to professional funds. Users who did not expect to see their Bitcoin back, sold their Mt. Gox claims to funds at large discounts. Those funds will likely look to realise significant gains for their LPs. Holders will also receive Bitcoin Cash, the Bitcoin spin-off that launched in November 2017. The so-called ‘fork’ of Bitcoin rewarded each Bitcoin holder an equivalent balance of Bitcoin Cash (BCH). Particularly BCH is likely to suffer since many 2014 Bitcoin holders view it as a ‘free gift’.
A potential victim of such a slow market could be the Ethereum ETF. Before the launch of the Bitcoin ETF in January this year, speculation abounded if the launch would be a ‘sell-the-news’ event. That proved not to be the case for Bitcoin. For Ethereum, the question arises yet again. Many professional investors are familiar with Bitcoin and its ‘thesis’ as digital gold. Ethereum’s case to become ‘the world’s settlement layer’ may be less clear to those outside the industry. Depending on how the ETF launch goes, crypto markets might be in for a slow, painful summer.