Is it Difficult for Bitcoin to See an Upward Trend Due to Selling by Mt.Gox and the Government?

[TL；DR]:

Many analysts generally believe that although the Mt.Gox compensation incident may bring some selling pressure due to factors such as long-term holders dominating, some creditors choosing to write down, and lower-than-expected compensation amounts, this impact will be controllable and short-lived.

The US government recently transferred about 4,000 Bitcoins with a market value of up to $240 million through exchanges, which directly led to a significant 6% drop in Bitcoin prices in a short period.

With market sentiment recovering and favorable factors emerging, the price of Bitcoin is still expected to rebound in July.

Introduction

In recent times, a large amount of Bitcoin has been flowing from important government agencies and early miners around the world to trading platforms, which has triggered market selling anxiety, especially the bankruptcy liquidation of Mt.Gox, which bears the burden of Bitcoin, as well as the selling by the US and German governments, deepening the worrying atmosphere in the market.

So, will the crypto market continue to decline, and when will the selling pressure end? This article will provide a detailed interpretation of this.

Mt.Gox Creditor Repayment Plan Starts in July

Mt.Gox was once the world’s leading Bitcoin exchange and suffered the largest Bitcoin theft in history in 2014, losing approximately 940,000 Bitcoins. This incident led to the exchange’s bankruptcy and prolonged legal disputes and bankruptcy proceedings.

Recently, the Mt.Gox liquidation case has made new progress, and it is reported that the creditor compensation plan will officially start in July. This liquidation involves the recovery of 141,868 Bitcoins (accounting for 15% of the total loss). Due to the significant increase in Bitcoin prices (from $451 at the time of bankruptcy to $63,500 at the time of uation), creditors will receive far more than expected USD value compensation, an increase of 140 times.

Specifically, the compensation plan allows creditors to choose to pay in advance and accept 90% of Bitcoin (i.e., a 10% discount). Approximately 75% of creditors are expected to choose this option, resulting in approximately 95,000 Bitcoins being released into the market in advance.

Source: public data

As nearly $9 billion worth of Bitcoin will be returned to victims in July, the market is concerned that this large-scale unlocking of funds may trigger a wave of selling, exacerbating the pressure on Bitcoin prices.

Since the repayment plan was announced on June 24, the market has responded with a diving reaction. Bitcoin briefly fell below the $60,000 mark then, but on the 25th, the market revealed that it would be compensated according to the 2014 value of $483, and the coin price quickly bottomed out and recovered.

Although the Mt.Gox liquidation event has finally shown signs of hope after many years, its impact on the market still needs to be closely monitored. Many analysts generally believe that although the Mt. Gox compensation event will bring some selling pressure due to factors such as long-term holders dominating, sufficient market liquidity, some creditors choosing to write down, lower-than-expected compensation amounts, and diversified recipients, this impact will be controllable and short-lived.

However, Glover, the Managing Director of Barclays Bank, holds the opposite view. He believes that after a long wait, creditors may choose to take advantage of this opportunity to lock in huge profits and “run away with money,” thus, there is a possibility of large-scale selling.

The Governments of the United States and Germany have Started to Adopt a Smashing Model One after Another

In addition to the high-profile Mt. Gox liquidation, the recent national-level smashing of Bitcoin and Ethereum by the US and German governments has also received widespread market attention.

Firstly, on July 1st, the German government announced the transfer of 1,500 Bitcoins worth up to $95 million to multiple crypto exchanges, a move interpreted by the market as a possible preparation for large-scale monetization by the German government.

Subsequently, Arkham’s analysis revealed that the German government had carried out larger-scale Bitcoin settlements on various exchanges, particularly transferring approximately $65 million in BTC to the exchanges, indicating an increase in its selling power.

Source: ARKHAM

It is worth noting that despite selling approximately $150 million worth of Bitcoin in the past month, the German government still holds approximately $2.8 billion (44.692K BTC) worth of Bitcoin, which is also the sword of the Dalix hanging over the bulls.

Meanwhile, we see that the US government has adopted different strategies. Monitoring shows that the US government has transferred 3,375 Ethereum to an unknown address, which is seen as an adjustment to Ethereum’s fund management strategy.

More notably, the US government recently transferred about 4,000 Bitcoins through exchanges, with a market value of up to $240 million. This operation directly led to a significant 6% drop in Bitcoin prices in a short period.

Source: ARKHAM

Will Bitcoin First Fall and Then Rise Due to Multiple Clearance Selling?

In addition to the selling pressure from Mt. Gox and the US and German governments, the recent selling behavior of some long-term Bitcoin holders (whales) cannot be ignored.

According to the latest data, these ancient miners have sold $1.2 billion worth of Bitcoin in the past two weeks, resonating with the sell-off by governments and institutions, jointly putting heavy pressure on market prices.

Source: Gate.io

It is not difficult to see from the above chart that the Bitcoin market is currently experiencing a severe fluctuation caused by multiple sell-offs, involving various levels such as government, long-term holders, and early miners. The coin price is also intuitively responding with weak performance, leading many people to worry about whether the next selling point will trigger a second round of decline in Bitcoin prices.

Overall, in the current situation where macro liquidity is still not loose, the expectations of multiple heavyweight Bitcoin crashes and the positive progress of spot Ethereum ETFs are intertwined and affect the current market. However, given the natural dominant position of Bitcoin, the potential impact of the Mt. Gox event on the market is more significant and may further suppress market sentiment.

However, it is worth noting that despite a surge in short-term selling, most early miners may still choose to hold for the long term rather than sell comprehensively, so the selling pressure is expected to be relatively controllable. Even in the long run, the current market turbulence may only be a temporary adjustment. In the future, with the recovery of market sentiment and the emergence of favorable factors, the price of Bitcoin is still expected to rebound in July.

Source: @ali_charts

From a deeper perspective, the recent series of selling behaviors eflects the behavioral changes of market participants and reveals that the Bitcoin market is gradually returning from macro data-driven to supply and demand conditions and industry event-driven. These structural changes under pressure are expected to further strengthen Bircoin’s upward momentum. After the market accumulates, it is expected to clear the subsequent spatial resistance.

Undoubtedly, we have entered a period that requires a cautious response. Although the short term is not optimistic, driven by favorable factors such as increased purchasing power from institutional investors and a relaxed regulatory environment for presidential election closures, the price of Bitcoin is expected to stabilize and rebound.