Bitcoin Price Crashes To Four-Month Low As Mt. Gox Makes Initial Repayments

Crypto markets continue to crash, with investors fearing an influx of heavy selling pressure from Mt. Gox creditors and the German government.

The combined capitalization slipped below $2.2 trillion for the first time since February, marking a 21% decline since tagging a local high of $2.785 four weeks ago.

Bitcoin’s price briefly slipped below $54,000 after crashing 8% in less than 12 hours, before posting a modest bounce to climb back above $55,000, according to CoinGecko. BTC is now down 23% in 30 days.

Ethereum tagged a low of $2,831 after dropping 10.6% in 11 hours, and last changed hands for $2,941. The price of ETH is also down 24% in roughly four weeks, despite expectations that spot Ether exchange-traded funds may commence trading within the coming weeks.

Yet despite the bearish performances from BTC and ETH, both assets continue to reclaim dominance as altcoins suffer brutal losses. Bitcoin now accounts for 52.85% of the combined cryptocurrency market cap while Ethereum comes in at 17.7% — up from 44.3% and 14.5% since mid-February, respectively.

Notable losses from top 100 altcoins include Arbitrum (ARB) with the third-heaviest loss of the past 24 hours at 14.4%, Optimism (OP) with a 13.9% pullback, Notcoin (NOT) with 13.5%, Polkadot (DOT) 4.2% dip, and Solana (SOL) with a modest retracement of 2.5%.

Only two top 100 cryptocurrencies bucked the trend to post a gain over the past 24 hours, with MultiversX (EGLD) up 6.2% and Fasttoken (FTN) up 1.9%.

According to CoinGlass, leverage traders suffered $570.5 million worth of liquidations in the past 24 hours, including $183 million in BTC positions and $137 million worth of ETH trades.

Mt. Gox transfers ignite sell-off

The bearish momentum coincided with Mt. Gox, the defunct pioneering cryptocurrency exchange, making its first repayments to creditors more than 10 years after halting withdrawals and filing for bankruptcy.

According to Arkham Intelligence, one of Mt. Gox’s wallets made a large Bitcoin transfer worth $2.71 billion roughly 12 hours ago — precipitating the sharp downturn in the crypto markets, Mt. Gox followed up with a $148.4 million transfer three hours later, before sending $84.9 million worth of BTC to the Bitbank cryptocurrency exchange.

On Reddit, user “mikeplus20”posted that they had been repaid by Mt. Gox via Bitbank. “The BTC/BCC coins are already under my control!” they said. “I received exactly the amount displayed in the Mt Gox table. I’m using Bitbank as the exchange.”

On July 5, a notice was published on Mt Gox’s website stating that some of its creditors had been repaid. It added that other repayments would be made once various conditions had been met, asking that creditors “wait for a while” — suggesting it may be some time before further distributions are made.

Curiously, the link to the notice now displays a 404 error, meaning the announcement was taken offline.

Are Mt. Gox fears overblown?

The drama follows a June 24 announcement from Mt. Gox’s rehabilitation trustee revealing that the exchange was preparing to begin distributing payouts this month.

Although the exchange holds 141,687 Bitcoin and Bitcoin Cash worth roughly $8 billion, a July 4 report from CoinShares estimated that only 75,000 BTC and BCH will be paid out in the short term — with the initial round of payouts earmarked for creditors who agreed to receive payment prior to the resolution of civil litigation proceedings in exchange for forfeiting 10% of the funds owed to them.

Still, with $3.9 billion worth of BTC potentially about to hit the markets, analysts have attributed the recent spate of bearish momentum to skittish investors seeking to reduce their exposure ahead of the repayments. CoinShares estimated that the value of creditors’ holdings is up 13,600% since Mt. Gox shuttered in February 2014.

However, not everyone is convinced that Mt. Gox’s distributions are cause for concern.

“For many, this will be an exorbitant tax event if they decide to sell immediately,” said Luke Nolan, a research associate at CoinShares. “It is very likely that a large number of creditors will either choose to only sell a small portion of their holdings, or hold for the time being.”

“Many of Mt. Gox's early users, as well as creditors, are long-term Bitcoin enthusiasts who are less likely to sell all of their Bitcoin immediately,” Lennix Lai, the chief commercial officer of OKX, told The Defiant.

German authorities appear to offload $483.8M of BTC in 16 days

Sizable Bitcoin transfers from wallets linked to German authorities have also spooked investors.

On Jan. 30, German police announced they had seized 50,000 BTC ($2.1 billion at the time) in Bitcoin from an individual who worked for Movie2k, a popular website that distributed pirated films between 2008 and 2013. The individual was held in custody since getting arrested over money laundering suspicions in 2019, and recently agreed to transfer their BTC holdings to German authorities while cooperating with police.

A wallet flagged by Arkham as belonging to the German government began making large transfers to cryptocurrency exchanges on June 19, igniting fear in the markets. So far, the wallet has offloaded 8,774 BTC ($483.8 million worth at current prices), including 4,774 BTC since the start of July.

Roughly four hours ago, the wallet transferred 547,439 BTC worth $30 million to Flow Traders, a market-making firm.

“Taking reference from previous sell-offs by law enforcement, such as the Silk Road case, they did not result in a sustained catastrophic price drop, which indicates that the market tends to hold sufficient liquidity to absorb the sell-off,” Lai said.