Bitcoin Value Plummets to Lowest in Four Months Amid Mt. Gox’s Initial Compensation Disbursements

Mounting concerns in the cryptocurrency sector see a further price decline, fueled by the anticipation of increased sell-offs from the beneficiaries of Mt. Gox and liquidation actions by German officials.

Overall market valuation plummeted under $2.2 trillion, the lowest since February, reflecting a 21% drop from a recent peak of $2.785 trillion observed four weeks prior.

Bitcoin’s valuation briefly dipped under $54,000 with an 8% drop within a 12-hour timespan, later recovering marginally to surpass $55,000 as stated by CoinGecko. Bitcoin’s price has now seen a 23% fall over the last 30 days.

Ethereum descended to $2,831 with a sharp 10.6% decline in 11 hours but somewhat rebounded to trade at $2,941. The price of ETH has also taken a 24% hit over almost a month, even with the impending trade of Ether-based ETFs.

Despite downtrends in BTC and ETH values, their market dominance is on the rise compared to other alternative coins’ steeper declines. Bitcoin now represents 52.85% and Ethereum 17.7% of the aggregate cryptocurrency market capitalization, increasing from 44.3% and 14.5% since mid-February, respectively.

Significant losses in the top 100 cryptos include Arbitrum (ARB), down 14.4%, Optimism (OP) losing 13.9%, Notcoin (NOT) down 13.5%, Polkadot (DOT) decreasing 4.2%, and Solana (SOL) with a modest retraction of 2.5%.

In a unique turn, two cryptos among the top 100 managed to record gains in the last 24 hours, with MultiversX (EGLD) up by 6.2% and Fasttoken (FTN) showing a 1.9% increase.

CoinGlass reports show that leverage trading resulted in $570.5 million worth of liquidations in the last day, including $183 million from Bitcoin positions and $137 million from Ethereum investments.

Fears Sparked by Mt. Gox Payouts

Recent market jitters align with Mt. Gox commencing refunds to its creditors, a process that started over a decade after the exchange ceased withdrawals and filed for bankruptcy.

Arkham Intelligence identified a considerable transfer of approximately $2.71 billion in Bitcoin from one of Mt. Gox’s wallets approximately half a day ago. This event preceded the dip in cryptocurrency markets. Following this, Mt. Gox transferred another $148.4 million and later moved $84.9 million worth of Bitcoin to the Bitbank exchange.

A Reddit user by the name “mikeplus20” announced that they have received repayment from Mt. Gox through Bitbank, now fully controlling the BTC/BCC coins credited to their account in line with the displayed amounts on Mt. Gox’s records. They mention using Bitbank for the exchange process.

An official notice on Mt Gox’s website declared that certain creditors have been compensated on July 5. It mentioned the continuation of repayments dependant on specific conditions, requesting creditors to be patient for more distributions. However, the notice has since been taken down as indicated by the current 404 error on the webpage.

Uncertainty Over Mt. Gox Repayment Effects

These developments come in the wake of an earlier June 24 announcement from Mt. Gox’s trustee signifying a start to the compensation payouts.

Despite possessing 141,687 Bitcoin and Bitcoin Cash, which amounts to roughly $8 billion, a report dated July 4 by CoinShares conveyed that a shorter term distribution of only about 75,000 BTC and BCH is likely. These earlier rounds of distribution are reserved for creditors who consented to payment before any resolution of ongoing legal contests, forgoing 10% of the funds due.

With close to $3.9 billion in Bitcoin poised to enter the market, the prevailing downtrend has been ascribed to anxious investors reducing their stakes in anticipation of these payouts. CoinShares highlighted that since February 2014, when Mt. Gox ceased operations, creditors’ holdings have surged by 13,600%.

Not all stakeholders believe the Mt. Gox repayments will severely impact the market. Luke Nolan of CoinShares mentioned that many creditors might opt to sell only a small fraction of their holdings or hold off for the time being due to potential tax implications from immediate sales.

Lennix Lai of OKX, suggested that because many original Mt. Gox users and current creditors are long-term proponents of Bitcoin, they may be less inclined to sell their holdings all at once.

German Authorities Suspected of Selling $483.8M Worth of BTC

Investors are also rattled by substantial Bitcoin movements from balances associated with German law enforcement.

At the end of January, German law enforcement disclosed confiscation of 50,000 BTC, worth $2.1 billion at that time, tied to an individual involved with Movie2k.to operations—a site notorious for distributing pirated movies from 2008 to 2013. Since the individual’s 2019 arrest over money laundering suspicions, they have agreed to transfer the Bitcoin holdings to German officials while cooperating with law enforcement efforts.

A wallet identified by Arkham as German government-associated made hefty cryptocurrency exchange transfers starting on June 19, which heightened market fears. This wallet has thus far divested 8,774 BTC (valuing approximately $483.8 million at present), including 4,774 BTC since early July.

Approximately four hours ago, the mentioned wallet executed a Bitcoin transfer of 547,439 BTC, totaling around $30 million, to Flow Traders, a known liquidity provider.

Using the Silk Road case as a precedent, Lai explains that even sell-offs by law enforcement in the past have not led to catastrophic, long-lasting price drops, which implies that the market typically maintains enough liquidity to absorb such events.