The cryptocurrency market is facing a tough period. Bitcoin sales by Mt. Gox and the German government are big worries for investors. Many are speculating about Bitcoin's future, and some experts believe the market won't calm down until these sales stop.
Bitcoin recently dropped by 7%, hitting its lowest point in four months at $53,550. This drop caused many investors to sell off their crypto assets. The repayments from Mt. Gox, expected to start in July, are a major reason for the market's nervousness. These repayments come after many years of legal battles and preparing to distribute funds to creditors.
Adding to the worry is that the German government might sell its seized Bitcoin. Germany could already be selling its holdings, which are about 50,000 BTC, valued at around $2.72 billion at current prices. In contrast, Mt. Gox creditors might receive up to $7.7 billion, following a hack that happened more than ten years ago.
Expert opinions and future projections
The recent downturn in the market is linked to a big transfer of Bitcoin from the Mt. Gox bankruptcy estate. Rachel Lin, CEO and co-founder of SynFutures, said that the current selling pressure won't ease soon. While they expect Mt. Gox users to sell their tokens, fewer sales than expected could make the market bounce back. However, heavy selling could push Bitcoin prices down to the $50,000 range.
Investors are nervous about billions of dollars in Bitcoin being released to Mt. Gox users. The bankrupt Tokyo-based exchange is getting ready to repay about $9 billion in tokens to thousands of users. Mt. Gox collapsed in 2014 after several hacks, losing between 650,000 and 950,000 bitcoins. This repayment, in Bitcoin and Bitcoin Cash, ends a long bankruptcy process.
For victims waiting for years, this is good news, but Bitcoin recently dropped to $59,000, marking its second-largest weekly decline this year. Analysts believe that giving 141,000 Bitcoins to Mt. Gox victims will likely cause a lot of selling as investors look to secure their profits.
John Glover, chief investment officer at Ledn, said many investors might cash out, considering it one of the best investments due to the long bankruptcy process. Additionally, James Butterfill, head of research at CoinShares, noted that the upcoming release of nearly $9 billion in Bitcoin has worried bullish investors for a long time.
The German government also sold 5,000 Bitcoins worth about $310 million, impacting the market. These Bitcoins came from the Movie2k piracy operation and were transferred to different exchanges. Experts think this sell-off impacted Bitcoin's recent drop but believe the effect will be minor and short-lived.
OKX's chief commercial officer, Lennix Lai, feels worries about the Mt. Gox sell-off are temporary. He says that early users and creditors of Mt. Gox are long-term Bitcoin supporters who probably won't sell their assets all at once. Past events like the Silk Road sell-off didn't cause lasting price drops.
James Butterfill believes the market has enough liquidity to handle these sales over the summer. CCData research analyst Jacob Joseph notes many creditors might accept smaller repayments for quicker payouts, reducing selling pressure. Recent price trends suggest the market might have already adjusted for the Mt. Gox repayments.
Alex Thorn, the research head at Galaxy Digital, mentioned that there might be fewer coins distributed than expected, which could lower the pressure to sell in the market. However, even a small amount of Bitcoin being sold could still impact prices.
Vijay Ayyar, Gemini's head of consumer growth for the Asia-Pacific region, said that because the recipients of these funds are varied, the impact might be spread out over time, reducing its immediate effect on Bitcoin prices.
Broader economic factors at play
Bitcoin's recent decline is also due to broader economic factors. Earlier this year, Bitcoin went above $70,000 after the U.S. Securities and Exchange Commission approved the first spot Bitcoin ETF.
However, consistent withdrawals from Bitcoin ETFs and major market sell-offs have kept investors nervous. On top of this, the Federal Reserve's recent announcement that it might only cut rates once this year has added to investor worries, as interest rate changes greatly affect cryptocurrencies.