Key Points
- Bitcoin’s price dropped below $55k following the distribution of $9 billion in Bitcoin by defunct exchange Mt.Gox.
- The distribution triggered massive crypto liquidations, wiping out most altcoins’ gains for the year.
The cryptocurrency exchange Mt.Gox, which is no longer operational, started distributing nearly $9 billion in Bitcoin (BTC) to its users last Friday. This led to a sharp decline in Bitcoin’s price, which fell by over 8 percent within 24 hours, settling around $54K.
Impact on the Market
This unexpected drop in Bitcoin’s price led to significant crypto liquidations, erasing most of this year’s gains from altcoins. Market data from Coinglass revealed that over $230 million was liquidated from Bitcoin’s derivative trading, while Ethereum saw over $167 million liquidated. In total, nearly $700 billion was liquidated from crypto derivative trading, with approximately $590 million involving long traders.
A study by PerkShield showed that many crypto whales were liquidated in lending positions. For example, a crypto whale who used the Compound protocol for a loan was liquidated for more than 173K Ethereum (ETH), equivalent to about $10 million. Bitcoin whales who used the coin as collateral for loans faced a similar fate.
Mt. Gox Starts Bitcoin Repayment
After more than a decade, Mt. Gox has started repaying its users. The exchange announced on Friday that it had made repayments in Bitcoin and Bitcoin Cash to some creditors through various crypto exchanges. The remaining users were informed that their payments would be processed once all set conditions were met.
According to data analysis by Arkham Intelligence, Mt. Gox moved over 47K Bitcoins, valued at approximately $2.71 billion, from cold storage to a new wallet. The commencement of Mt. Gox’s crypto distribution has sparked further bearish sentiments in an already oversold market. Moreover, most crypto assets have been trapped in a bearish outlook for the past few weeks.
Whales Selling Off
As capital continues to leave the crypto market, down from over $110 billion in March to about $20 billion, on-chain data shows that whales have been selling off. In the past month, Bitcoin whales have sold more than 30K coins, worth over $1.8 billion.
The demand for US-based spot Bitcoin ETFs has noticeably decreased in recent weeks due to significant economic uncertainty. Furthermore, the US Federal Reserve recently indicated that inflation has not slowed down quickly enough to justify an interest rate cut later this year.
After falling below the crucial support level of around $56k, Bitcoin’s price signals further midterm bearish sentiment. According to most crypto analysts, Bitcoin’s price could continue its downward trend towards the next major support level around $52K. If Bitcoin buyers fail to defend the support level of around $52K, the next major liquidity range is around $48K.