1 Introduction: Overview of Key Events in the Recent Cryptocurrency Market

The cryptocurrency market has recently experienced two significant events: the approval of the Ethereum ETF and the latest developments in the Mt. Gox creditor compensation case. These two events have had a substantial impact on the market, but their effects are markedly different. Unlike the surge in Bitcoin's price following the approval of its ETF, the launch of the Ethereum ETF did not drive its price up as the market had anticipated; instead, it saw capital outflows, even negatively affecting Bitcoin's price. Meanwhile, the nearly decade-long Mt. Gox compensation case has finally made substantial progress, injecting new uncertainty into the market. This article will delve into the reasons behind these events, explore their short-term and long-term impacts on the cryptocurrency market, and discuss how investors should respond to these market changes.

2 Analysis of Ethereum ETF Capital Flows

2.1 Grayscale ETF Outflows

Since the official trading of the Ethereum ETF began on July 26, 2024, Grayscale, as the largest ETF institution by holdings, has shown a significant trend of capital outflows. According to Coingalss data, the first trading day saw a net outflow of 140,800 ETH, followed by outflows of 93,900, 103,800, 112,300, 64,300, and 36,300 ETH over the next five trading days. Although the average daily net outflow has shown a decreasing trend, the cumulative outflow remains considerable. By the sixth trading day, Grayscale had a total outflow of 551,300 ETH, while the overall market net outflow was 159,800 ETH, indicating that other ETFs are absorbing Grayscale's outflows. Notably, Grayscale's mini trust ETH, while maintaining a net inflow status, is relatively small, ranking only fourth in net inflow over six days. This ongoing capital outflow phenomenon suggests that some investors may be shifting from Grayscale to other newly approved ETF products in search of lower fees or better liquidity. However, the slowing outflow rate may indicate that the market is gradually reaching a new balance.

Ethereum ETF Inflows and Outflows

2.2 Comparison of Capital Flows Among ETF Institutions

Among the approved Ethereum ETFs, only Grayscale has shown a net outflow, while other institutions have maintained net inflows. The main Ethereum ETFs include ETHE, ETH, ETHA, ETHW, FETH, ETHV, EZET, CETH, and QETH. Based on net inflow rankings, BlackRock's ETHA ranks first, followed by Bitwise's ETHW and Fidelity's FETH. Grayscale's small trust ETH ranks fourth, followed by ETHV, EZET, CETH, and QETH. This differentiated capital flow reflects investors' preferences for different ETF products and may also indicate a competitive landscape among institutions, exposing the competitive pressure that Grayscale may face.

Comparison of ETF Institutions' Fee Structures

2.3 Comparison with Bitcoin ETF Data

According to coinank data, the Bitcoin spot ETF achieved a net inflow of $1.261 billion over 12 trading days (from July 17 to July 30), with Grayscale currently holding 285,500 Bitcoins. In contrast, the Ethereum spot ETF experienced a net outflow of $524 million over six trading days (from July 23 to July 30), with Grayscale still holding 2.931 million Ethereum.

Looking back at the situation after the approval of the Bitcoin ETF, Grayscale's Bitcoin holdings decreased from 619,400 to 446,500 (about 27%) when the market reached a balance point, leading to a significant price increase (for reference only). Currently, the Ethereum ETF has not yet reached a similar balance point, with Grayscale's Ethereum holdings decreasing by 551,300 from 2.9298 million; at this rate, it may take another 1-2 weeks to reach a 27% decline. This suggests that the Ethereum ETF market may require more time to digest the initial selling pressure. Investors should closely monitor changes in Grayscale's holdings, as reaching a balance point could be a key trigger for a rebound in Ethereum's price.

Grayscale ETF Bitcoin Holdings and Price Comparison

Grayscale ETF Ethereum Holdings and Price Comparison

3 Mt. Gox Incident Progress

3.1 Incident Background and Latest Developments

Mt. Gox, which started in 2010, once handled over 80% of global Bitcoin transactions in 2013, becoming an industry giant. However, in February 2014, Mt. Gox suddenly fell into crisis, shutting down its website and claiming to have lost approximately 850,000 Bitcoins, worth about $473 million. This incident shocked the entire cryptocurrency community. On February 28 of the same month, Mt. Gox officially filed for bankruptcy protection, with financial reports showing liabilities of 6.5 billion yen and assets of only 3.8 billion yen, exposing severe financial issues within the company. Subsequently, the person in charge, Mark Karpeles, was arrested by the Tokyo police but later released on bail. During the investigation, the company unexpectedly discovered 200,000 Bitcoins in an old wallet, slightly alleviating the losses. After years of legal proceedings and creditor rights protection, a liquidation compensation plan was finally established, planning to repay creditors approximately 142,000 BTC and 143,000 BCH, with a total value of about $8.77 billion. This incident not only caused significant economic losses but also became an important turning point for promoting industry self-regulation and improvement.

Latest Developments:

• Exchanges such as Kraken and Bitstamp have begun returning funds to Mt. Gox creditors.
• Some creditors have received returned Bitcoins in their Kraken accounts.
• Assets allocated to creditors by Bitstamp are now fully available.

3.2 Analysis of Mt. Gox Holdings Data

According to Akam data, on July 31, 2024, Mt. Gox addresses transferred out 33,963.8 BTC (approximately $224.8 million). Since July 5, a total of 95,522.7 BTC (approximately $614.3 million) has been transferred out, of which 61,558.9 BTC (approximately $389.4 million) has been distributed through Bitbank, SBI VC Trade, Kraken, and Bitstamp. As of July 31, the Mt. Gox account balance is approximately 46,000 Bitcoins, worth about $299 million.

Mt. Gox Account Transfer Records

Looking at the historical changes in the Mt. Gox account balance, we can clearly see a long-term stable horizontal trend line. However, recently this horizontal line has shown a significant downward trend. This change is not just a fluctuation in data; it symbolizes the end of an era. For many years, the Mt. Gox incident has been an enduring shadow over the cryptocurrency market, becoming a focal point for investors and analysts. Now, as the line representing the account balance begins to tilt downward, we see a clear signal that this long-standing unresolved issue is about to conclude in 2024. This turning point not only marks the end of Mt. Gox but may also indicate that the market will be free from the influence of this long-term negative factor.

Mt. Gox Account Balance

3.3 Comprehensive Impact of the Mt. Gox Incident on Market Sentiment

Former Mt. Gox CEO Mark Karpelès stated, "Although it cannot be quantified, we believe that the creditor group is mainly composed of stubborn Bitcoin holders. Thousands of creditors have waited 10 years for compensation and have rejected compelling and aggressive settlement offers during this time, indicating that they want their coins back." This statement provides important clues for understanding the motivations behind creditors' behavior.

Based on Karpelès's perspective, we can further analyze the potential impact of the Mt. Gox compensation on the market:

1) Considering that the Mt. Gox compensation is in cryptocurrency rather than fiat currency, coupled with the long waiting period experienced by creditors, we can speculate that this group of early Bitcoin participants may have a strong market belief and a willingness to hold long-term. They may be more inclined to continue holding rather than cashing out immediately in the current relatively strong market environment.

2) Implicit increase in holding costs: It is worth noting that a considerable portion of creditors has chosen to transfer their claims to professional bankruptcy liquidation companies or institutional investors, which may reduce the likelihood of these institutions engaging in large-scale sell-offs in the short term.

3) Diversified market pressure: While some degree of selling pressure is inevitable, based on the above factors, we can reasonably expect that the likelihood of large-scale concentrated sell-offs is low. The selling pressure may be gradually released over several months, giving the market enough time to digest this supply, thereby keeping the overall impact relatively controllable.

3.4 Short-term Market Trend Prediction

According to the latest data, Grayscale ETHE has seen outflows of 510,000 Ethereum (ETH) but still holds a substantial position of about 2.9 million ETH. Mt. Gox has returned most of the Bitcoins to creditors, with only about 50,000 Bitcoins remaining to be processed. The combined effect of these two events may create some pressure on the market in the short term, and the positive sentiment in the market may need to absorb this portion of funds until a balanced state is reached. On August 1, the U.S. Federal Reserve announced that it would maintain the federal funds rate target range at 5.25% to 5.5%. This is the eighth consecutive meeting since last September that the Fed has kept rates unchanged, and the market may be looking forward to positive news from the Fed's monetary policy meeting and Chairman Powell's press conference in September.

4 Investor Response Strategies

In light of the potential selling pressure from Mt. Gox, the long-term selling pressure held by the U.S. government, and the public's preference for mainstream cryptocurrencies (BTC, ETH), investors need to clarify their positioning. Long-term investors may be less affected by these short-term factors, while short-term investors should be more vigilant about risks, especially in small-cap token investments. For long-term investors, this may be a good opportunity to gradually build positions; while short-term investors need to be more cautious, closely monitoring market dynamics and adjusting strategies in a timely manner. Regardless, diversification and risk management are key to coping with market uncertainties.