Market Reaction to Mt. Gox Payouts
In July, news broke about Mt. Gox beginning payouts to its former clients. This announcement caused a negative reaction in the crypto market. The exchange holds over 140,000 BTC, valued at $9 billion. Additionally, the German government chose this moment to reduce its reserves. Over the past 30 days, it sold 26,200 BTC worth $1.5 billion. These events led to a 25% drop in Bitcoin’s price.
Overstated Influence of Mt. Gox
The negative impact of Mt. Gox is somewhat exaggerated. Firstly, 75% of claimants opted for an early lump-sum payout of 90% through voting. The remaining 25% decided to pursue full repayment, which could take several years. Secondly, the MGIF investment fund, holding 20,000 BTC, publicly confirmed it would not sell its coins soon. Bitcoinica, with 10,000 BTC, is expected to follow suit.
Real Market Pressure
Out of the 140,000 BTC, actual market pressure may come from 75,000 BTC or $4.3 billion. Coinshares analysts predict that 60% of this amount could be sold. Considering the liquidity of the platforms receiving the payouts, this could lead to a 19.2% price drop if sold in one day. If the sales are spread over several months, the price may decrease by only 0.64%.
Comparison with Grayscale Fund
The $4.3 billion pressure can be compared to the outflow from the Grayscale fund. In March, Grayscale sold $6.4 billion in Bitcoin. Since its transformation, the total sales amounted to $18.5 billion.
While concerning, this situation is not critical for the spot market, which averages over $1 trillion in monthly turnover.
ETF Investors’ Resilience
The main fears centered around a significant capital outflow from US spot ETFs. Retail investors account for at least half of these volumes. To the credit of fund buyers, their reaction to the negative news was restrained. They saw the 25% price drop as an opportunity. In the last two working days, Bitcoin ETF net inflows totaled $437.9 million.
