Mt.Gox crash hits, BTC 24H drop of 10% falls below $54,000, where is the bottom?

Author: Fu Ruo, Odaily Planet Daily

This afternoon, Bitcoin briefly fell below 54,000 USDT, hitting a low of 53,269 USDT, marking the lowest point since February 26 this year, with a maximum drop of over 10% in 24 hours. As of the time of publication, it has rebounded to 64,600 USDT. Altcoins are even more "tragic," with an average drop of around 10%. The real-time market data from OKX is as follows:

• ETH briefly dropped to 2,806 USDT, currently reported at 2,881.61 USDT, with a 24H drop of 8.01%;
• SOL briefly dropped to 120.65 USDT, currently reported at 126.74 USDT, with a 24H drop of 6.38%;
• PEPE briefly dropped to 0.000008221 USDT, currently reported at 0.000008326 USDT, with a 24H drop of 12.58%;
• OP briefly dropped to 1.22 USDT, currently reported at 1.3232 USDT, with a 24H drop of 13.36%;
• STRK briefly dropped to 0.4488 USDT, currently reported at 0.4951 USDT, with a 24H drop of 15.76%;

According to CoinGecko data, affected by the overall market decline, the total market capitalization of cryptocurrencies has shrunk to 2.08 trillion US dollars, with a 24H drop of 9%.

In terms of derivatives trading, Coinglass data shows that in the past 24 hours, the total liquidation amount across the network has reached 678 million US dollars, with the vast majority being long liquidations, amounting to 588 million US dollars. Among them, the liquidation amount for BTC is 226 million US dollars, and for ETH, it is 166 million US dollars.

Mt.Gox Repayment, US and German Government Sales, ETF Outflows

The current market downturn is mainly due to the "Mt.Gox" repayments and the BTC sales by the US and German governments.

After several Mt.Gox wallets participated in small transfer tests yesterday, this morning, Mt.Gox (address starting with 1 HeHLv) transferred over 47,228.7 BTC to a new address (starting with 1L7Xbx), valued at approximately 2.71 billion US dollars. Subsequently, this address transferred over 47,200 BTC to two addresses, including:

• Transferring 44,500 BTC (2.55 billion US dollars) to address 16 ArP 3…VqdF;
• Transferring 2,700 BTC (154.8 million US dollars) to its internal address 1 JbezD…APs 6.

According to on-chain analyst @ai_ 9684 xtpa, Mt.Gox transferred 1,544 BTC to the new address 1 PKGG…szwzV (valued at 84.87 million US dollars) two hours ago, which is suspected to belong to the exchange Bitbank. This move indicates that Mt.Gox is offloading, causing Bitcoin to drop to 53,269 USDT. The multiple token transfers by Mt.Gox in the past two days have intensified market panic regarding its sell-off, becoming a major factor in today's market decline.

Additionally, on-chain data shows that in recent days, the German government has transferred Bitcoin worth over 195 million US dollars to various cryptocurrency exchanges, including Coinbase, Kraken, and Bitstamp, exacerbating market volatility. Furthermore, according to Arkham monitoring, a US government wallet address (starting with 349c6) transferred 237 BTC to an address starting with bc1qvc yesterday afternoon, amounting to approximately 13.67 million US dollars. The movements of the holding addresses of the US and German governments have also intensified market concerns about future trends.

Moreover, Bitcoin ETF spot has recently seen net outflows in the past few trading days, with nine Bitcoin ETFs collectively reducing their holdings by 609 BTC, valued at approximately 35 million US dollars. According to CryptoQuant data, during this decline, approximately 2.4 billion US dollars worth of Bitcoin with a holding period of 3-6 months has been transferred. Analyst Cauê Oliveira pointed out that this represents the selling pressure from some entities that purchased at the beginning of the year, or that speculators targeting Bitcoin ETFs and halving expectations are being liquidated.

Under the combined influence of multiple factors, the cryptocurrency market has further declined.

Future Expectations: Trump's Presidency May Change Market Downturn

The main reason for this round of market decline is the Mt.Gox sell-off; however, the market may be overestimating its impact.

Vijay Ayyar, Head of Consumer Growth for Gemini Asia Pacific, stated that given the variety of recipients, the overall impact of Mt. Gox's cryptocurrency repayments may be "dispersed." On one hand, some individual holders will immediately receive Bitcoin; on the other hand, a "large amount" of Bitcoin will be paid to the claims fund. Those funds will then distribute the cryptocurrency to their limited partners, so the entire process may take some time, which will increase the time factor affecting the price.

Additionally, Galaxy Research Director Alex Thorn shares the same view, believing that the number of Bitcoins ultimately received as compensation from Mt.Gox will be less than people imagine, meaning that the selling pressure will be smaller than the market expects. Most creditors he has spoken to indicated that they will receive compensation in kind, that is, in cryptocurrency rather than fiat currency, and they will mainly hold these assets, believing that this group will not engage in large-scale selling.

Furthermore, JPMorgan analysts stated that Mt.Gox repayments may initially put pressure on the crypto market, but the market may recover starting in August. This is because the FTX repayments are also approaching, and creditors may reinvest the funds into crypto assets.

Evgeny Gaevoy, founder and CEO of Wintermute, posted on X, stating: "Stay steady, the current market is just a seasonal phenomenon of summer. The market will recover in August and September, before the US elections."

Another factor contributing to the market downturn is the German government's sell-off. In this regard, TRON founder Justin Sun posted on X, expressing his willingness to negotiate with the German government to purchase all its BTC over-the-counter to minimize market impact. Meanwhile, German lawmaker Joana Cotar strongly criticized the government's large-scale Bitcoin selling initiative, stating that the German government should reconsider this strategy and discuss using Bitcoin as a strategic reserve currency with the US.

As for ETF fund outflows, compared to the previous weeks of continuous net outflows, yesterday's fund outflow is more of a market adjustment.

CryptoQuant founder and CEO Ki Young Ju stated that this cycle is different, with different sources of funds. Currently, spot Bitcoin ETFs account for a quarter of the total spot trading volume, which means that the newly entering funds are more mature than ever before, and he believes that more mature funds will enter in the future. Mature funds typically have diamond hands, and there are still many institutional capital waiting to enter this field, with channels now open for them.

The most significant factors influencing future market trends are the results of the US elections and expectations for Federal Reserve interest rate cuts.

Market analysis suggests that if Trump is successful in his campaign, the Russia-Ukraine war may come to a conclusion, and the end of the Russia-Ukraine war will inevitably lead to a rise in the overall global market, potentially bringing a wave of increases in the crypto market. Additionally, as a crypto-friendly figure, Trump's presidency may further enhance the mainstream acceptance of the crypto industry, thereby improving the positive outlook for the crypto sector.

Moreover, expectations for Federal Reserve interest rate cuts have been a significant positive that the market has been looking forward to this year. Federal Reserve Chairman Powell has expressed views on interest rate cuts for 2024 on different occasions. In a speech in April, he mentioned that a cautious approach should be taken regarding interest rate cuts and stated that it "may be appropriate" to start cutting rates that year. Additionally, he may provide clearer hints about the interest rate cut schedule in the June FOMC meeting.

In summary, the current market downturn is evident, and apart from the Federal Reserve announcing interest rate cuts, we can only hope for positive developments from the progress of the US elections; as it stands, Trump's chances remain high, and we look forward to a market increase in November.