Blockchain
Mt. Gox effect? Bitcoin (BTC) dominance rate sees biggest drop in 5 months
Bitcoin (BTC) is usually less volatile than alternative cryptocurrencies (altcoins), but Monday was different.
The major cryptocurrency took a bigger hit than smaller tokens, leading to a marked decline in its market dominance in a compelling representation of apprehensions about the impact of the impending compensation to victims of a 2014 Mt. Gox hack.
According to charting platform TradingView, BTC’s dominance, or share of the total value of the cryptocurrency market, fell 1.8% to 54.34%, the largest single-day percentage drop since January 12. In other words, investors likely took money out of bitcoin faster than its competitors. The cryptocurrency’s price fell nearly 5%, at one point hitting lows below $59,000. CoinDesk data show.
The sell-off wasn’t without reason. News that the defunct cryptocurrency exchange planned to distribute 140,000 BTC to hack victims in July reinforced concerns that recipients would try to sell once they received the payments, creating an oversupply in the market. This added to growing pressure since June 7 due to faster selling by miners and outflows from spot exchange-traded funds (ETFs).
According to data tracked by Amberdata, sell-off concerns have increased demand for short-term BTC put options on the Deribit exchange. Put options offer protection against price drops in the underlying asset.
Seven-day and one-month call-put skews, which indicate what traders are willing to pay to acquire an asymmetric payout up or down over a week and a month, have turned negative. This is a sign of renewed demand for puts.
Some observers, however, say the actual selling pressure from Mt. Gox redemptions may be more measured.
“The exact amount of Mt. Gox funds to be distributed in July is not specified, but it is part of a larger repayment plan that includes 142,000 Bitcoin and 143,000 Bitcoin Cash, as well as fiat currency totaling 69 billion Japanese yen ($432 million),” Tagus Capital said in a market note.
“However, Mt. Gox creditors may be holding on to their Bitcoin rather than selling it, as they are long-term investors who have resisted previous offers of USD payments and may face capital gains tax on sales,” Tagus Capital said in a market note, Tagus Capital added.