Blockchain
Bitcoin Drops 12% Last Week as Mt. Gox Refunds Flood Market
In the past week, the Bitcoin price has fallen nearly 12% to around $55,700 as of midday ET on Monday. The original cryptocurrency’s latest decline, experts told Fortune, is largely due to a surge in on-chain sales.
One catalyst for the recent sell-off comes from Mt. Gox redemptions, according to Matteo Greco, a research analyst at investment firm Fineqia International. The Tokyo-based crypto exchange It went bankrupt a decade ago following a hackbut has begun returning about $8 billion in Bitcoin to creditors.
According to Greco, 47,228 bitcoins have been verified so far from a wallet associated with Mt. Gox to a new address likely designated for refunds. Although investors may be required to wait up to three months to access the funds, news of the refunds has spooked the market and prompted current holders to start selling, Greco says.
Sales pressure ‘over’
Adding to this pressure is the recent transfer of Bitcoin to exchanges by the German and U.S. governments. In about two weeks, wallet addresses linked to those nations sent $737.6 million in Bitcoin to Monetary baseBitstamp, Kraken and Flow Traders, according to Block worksThe Bitcoin in question is believed to have been seized by authorities through various criminal proceedings.
But looking further, the coin has failed to gain momentum since mid-March, when it hit record highs of just over $73,000. The MVRV (market value to realized value) ratio currently stands at around 1.5, indicating an average unrealized profit of 50% among market participants, according to Greco. “This is a sharp decline from the three-plus mark seen in March,” he adds.
Furthermore, selling pressure remains high after April Bitcoin Halving, which has cut the rewards miners receive for minting new coins by 50%. While this pressure has shown signs of easing in recent days, it still outstrips demand, worsening the short-term price decline, Greco says.
If the current pullback lasts until the end of this week, Bitcoin will have been in decline for five straight weeks, the longest stretch since the 2022 bear market. Traders “don’t want to be faced with trillions of dollars of supply that could come to market in the coming weeks,” Andrew Baehr, head of product at CoinDesk Indices, told Fortune.
And while these market pressures are compounding in the short term, they remain “finite” and investors, from a historical perspective, can expect some sort of resolution, adds Baehr, who likened the situation to the market “cleaning dirty dishes. Potential waves of new adoption can grow larger and can be a source of support to drive prices higher.”
And what about the “Trump Trade”?
As the market searches for a way out of its nearly four-month doldrums, some are looking to the possibility of a “Trump Trade” to boost the market, the term for a rally later this year if the former president wins the November election. After last week’s disastrous presidential debate for President Joe Biden, some are seeing the odds of a crypto-friendly president rising.
In recent months, Trump has sought to undermine every dollar and vote from the cryptocurrency industry that he can, including courting executives from publicly traded Bitcoin miners CleanSpark and Riot Platforms at an event at Mar-a-Lago. Weeks before that meeting, Trump reportedly turned to Elon Musk for advice on how to frame his cryptocurrency policy, Bloomberg reportedHis presidential campaign also has started to accept Donations via any cryptocurrency accepted via Monetary base.