Written by 1912212.eth, Foresight News
A document with few words has dealt a blow to the crypto market.
During the European trading session today, Bitcoin experienced a sharp decline, falling by 2.4% within just 1 hour. At one point, it approached the critical $60,000 level, dropping to a low of $60,500. Similarly, Ethereum also fell nearly 3% within the same time frame, reaching a low of $3240. As a result, the entire crypto market saw a widespread decline. Rats, which was leading the market this morning, almost completely reversed the gains made overnight, and altcoins experienced declines of over 10% throughout the day.
According to Coinglass data, the market crash resulted in $105 million worth of liquidations within an hour, with long positions liquidating $103 million and short positions liquidating $1.94 million. Bitcoin liquidated $41.14 million, while Ethereum liquidated $31.39 million.
In pre-market trading, blockchain concepts in the US fell across the board, with Coinbase down 7.26%, Microstrategy down 5.19%, and Riot Platform down 3.66%.
The catalyst behind all of this is none other than Mt.Gox.
Mt.Gox Compensation to Begin
As per an official website document, the trustee of Mt.Gox has indicated that the process of compensating BTC and BCH creditors will commence in early July. The preparations for this have already been completed, including the exchange and confirmation of necessary information with relevant exchanges.
Due to the large sum of compensation involved, Mt.Gox is set to repay a total of 142,000 BTC (approximately $8.72 billion) and 143,000 BCH ($50.765 million), totaling around $8.77 billion. Shortly after this announcement, the market reacted by starting to decline.
With the market currently experiencing poor liquidity, the sudden release of nearly $10 billion in selling pressure has exacerbated the existing panic, leading many to choose to exit the market and wait and see.
In the early hours of May 28, it was announced that after 10 years of bankruptcy, Mt.Gox’s cold wallet, which had been inactive for 5 years, saw some activity. It made 10 consecutive transactions, transferring 141,685 BTC to an unknown address.
Will the selling pressure be released all at once?
Mt.Gox has already considered the market risk posed by a massive sell-off.
According to an announcement on the Mt.Gox website, the compensation plan for creditors includes a basic and proportional repayment. The basic repayment allows creditors to claim up to 200,000 yen in fiat currency, while the proportional repayment offers two flexible options: early one-time repayment or midterm and final repayment. The one-time repayment only allows for partial compensation, with the portion exceeding 200,000 yen allowing creditors to choose a combination of BTC, BCH, and yen, or receive the entire amount in fiat currency. Meanwhile, choosing midterm and final repayment will yield more compensation but may take several years. Payment options also include cash and cryptocurrency.
Overall, this dispersed compensation method is beneficial in mitigating the significant market downturn caused by concentrated selling.
Additionally, due to the prolonged timeframe, a considerable number of creditors have sold their claims to funds. Given the expected rate cuts at the end of the year, some funds may not immediately engage in selling.
What’s next?
Historically, the months following Bitcoin halving have been largely uneventful.
Andrei Grachev, partner at DWF, stated that altcoins have maintained a market share of 14.45% since early 2021. Google search volume has been declining since March 2024. A stable BTC instills confidence, but BTC itself is unlikely to increase by 50 times, whereas altcoins could. If Bitcoin remains stable, we could see a bull market for altcoins in the coming months.
Markus Thielen, founder of 10x Research, said that from a technical standpoint, Bitcoin appears to be following a double-top pattern and is currently testing a support level. This should be our basic assumption unless the pattern fails. This pattern could easily lead to a drop in BTC price to $50,000 or even $45,000. The US election and consumer price index later this year should be positive, but prices could still experience a steeper pullback.
