Bitcoin
Bitcoin Drops 12% Last Week as Mt. Gox Payments Flood the Market
Last week, the Bitcoin price fell nearly 12% to around $55,700 by noon ET on Monday. The original cryptocurrency’s latest drop, experts told Fortune, is largely due to a surge in on-chain sales.
One catalyst for the recent sell-off stems from refunds made by Mt. Gox, according to Matteo Greco, a research analyst at investment firm Fineqia International. The Tokyo-based cryptocurrency exchange went bankrupt a decade ago after a hackbut has started returning around $8 billion in Bitcoin to creditors.
According to Greco, so far it has been verified that 47,228 Bitcoins from a wallet associated with Mt. Gox have been moved to a new address likely designated for refunds. While investors may be forced to wait up to three months to access the funds, news of the refunds spooked the market and caused current holders to start selling, Greco says.
‘Finite’ selling pressures
Adding to this pressure is the recent Bitcoin transfer to exchanges by the German and American governments. Over the course of approximately two weeks, wallet addresses tied to these nations sent $737.6 million worth of Bitcoin to CoinbaseBitstamp, Kraken and Flow Traders, according to Building blocksThe Bitcoin in question is believed to have been seized by authorities through various criminal proceedings.
But zooming in 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 versus realized value) ratio is currently around 1.5, indicating an average unrealized profit of 50% among market participants, according to Greco. “This is a sharp decline from the above-three value seen in March,” he adds.
Furthermore, selling pressure remains high after the April drop. Bitcoin halving, that reduced the rewards miners receive for minting new coins by 50%. While that pressure has shown signs of abating in recent days, it still exceeds 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 consecutive weeks, the longest stretch since the 2022 bear market. Traders “don’t want to get in front of billions of dollars of supply that could hit the 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 could escalate further and could be a source of support to drive prices higher.”
What about the “Trump Trade”?
As the market looks for a way out of its nearly four-month-long rut, some are looking at the possibility of a “Trump Trade” to boost the market — the term for a rally toward the end of the year if the former president wins the November election. After last week’s disastrous presidential debate for President Joe Biden, some see the chances of a crypto-friendly president growing.
In recent months, Trump has sought to exploit every dollar and vote from the cryptocurrency industry that he can, including courting executives from publicly traded Bitcoin mining companies CleanSpark and Riot Platforms for an event at Mar-a-Lago. Weeks before that meeting, Trump reportedly turned to Elon Musk for advice on crafting his cryptocurrency policy, Bloomberg reported. His presidential campaign also began to accept donations through any crypto asset accepted through Coinbase.