The cryptocurrency market faced a massive downturn on Friday. Investors were spooked by news of the Mt. Gox bitcoin payouts, leading to significant losses across the board. Nearly $170 billion in market value evaporated as the news spread.
Key Takeaways
- Over $170 billion wiped off crypto market.
- Bitcoin drops nearly 6%, Ether falls 9%.
- Mt. Gox begins Bitcoin and Bitcoin Cash repayments.
- Hefty liquidations in derivatives markets.
- Germany sells roughly 3,000 bitcoins.
- Analysts remain optimistic about Bitcoin’s future.
- Investors await the launch of U.S. Ether ETFs.
Bitcoin and Ether Prices Drop
By 10:50 a.m. in London, Bitcoin’s price had dropped nearly 6% in 24 hours. It fell to $54,500.53, marking its first-time trading below $55,000 since February 27, according to CoinGecko data. Ether, the second-largest cryptocurrency, also suffered, sinking around 9% to $2,872.10.
Market Cap Losses
The entire cryptocurrency market lost over $170 billion in combined market capitalization within 24 hours. This data, provided by CoinGecko, highlights the severity of the market’s reaction.
Mt. Gox Payouts Begin
Nobuaki Kobayashi, the trustee for the Mt. Gox bankruptcy estate, announced that repayments had begun. These repayments, in Bitcoin and Bitcoin Cash, are being made to some creditors through designated crypto exchanges. However, Kobayashi didn’t specify how much money was transferred.
Conditions for Remaining Funds
Kobayashi mentioned that remaining funds would be returned once specific conditions are met. These include concluding the conversations between the exchanges and the trustee and verifying the legitimacy of enrolled accounts. He emphasized that repayments must be made safely and securely, urging eligible creditors to be patient.
Movement of Mt. Gox Bitcoins
Blockchain analytics firm Arkham Intelligence reported that a small amount of Bitcoin was moved out of Mt. Gox wallets. The biggest transaction involved a $24 transfer to Bitbank, a cryptocurrency exchange based in Japan, where one of the beneficiaries was financing the repayments.
Impact on the Crypto Market
The announcement and subsequent movement of coins have put significant pressure on the cryptocurrency market. This news, coupled with the fear of a massive sell-off, led to hefty liquidations in the derivatives markets.
Liquidations Data
Crypto data firm Coinglass reported that 229,755 traders had their positions liquidated within 24 hours. These positions were worth a combined $639.58 million. Of this amount, $540.46 million represented long trades, positions taken by investors expecting asset prices to rise.
Additional Pressure from Germany
The German government also contributed to the market pressure. On Thursday, they sold roughly 3,000 bitcoins, worth about $175 million at current prices. These bitcoins were part of a 50,000-bitcoin pile seized in connection with the movie piracy operation, Movie2k. Arkham Intelligence noted that Germany still holds over 40,000 bitcoins, worth more than $2 billion.
Analyst Predictions
Analysts at CCData predict that Bitcoin hasn’t yet reached the peak of its current appreciation cycle. They believe it is likely to hit a fresh all-time high. Historical market cycles show that Bitcoin’s halving event, which reduces the supply of new bitcoins, usually precedes a price increase.
This cycle can last between 12 and 18 months before reaching a peak. The last halving event occurred on April 19 this year, suggesting the current cycle has more time to run.
Fundstrat Global Advisors’ View
Tom Lee, co-founder of Fundstrat Global Advisors, remains bullish on Bitcoin. He told CNBC’s “Squawk Box” that he still sees Bitcoin hitting $150,000. He believes the end of the Mt. Gox token disbursement will remove one of the biggest market overhangs, potentially leading to a sharp rebound in the second half of the year.
Awaiting Ether ETF
Investors are also looking forward to the launch of an Ether exchange-traded fund (ETF) in the U.S. This follows the approval of the first U.S. spot Bitcoin ETF in January. In May, the U.S. Securities and Exchange Commission approved a rule change paving the way for ETFs that buy and hold Ether. Companies like VanEck, BlackRock, Bitwise, and Galaxy Digital are all aiming to launch their own Ether ETFs.
The recent events have undeniably shaken the cryptocurrency market, but many experts believe that this downturn is temporary and the market will recover.
Disclaimer
FAQ
Cryptocurrency is a digital form of currency secured by cryptography, not controlled by governments or banks.
Cryptocurrency wallets are digital tools for storing and managing your crypto assets.
Best practices for crypto investment include research, diversification, investing what you can afford to lose, and avoiding hype-driven investments.
