Analysts are split about the impact of the nearly $9 billion worth of Bitcoin BTC/USD about to be disbursed to victims of the defunct Mt. Gox exchange.
What Happened: Mt. Gox, which once handled 80% of global dollar trades for Bitcoin, shut down in February 2014 when Bitcoin was valued at about $600.
Speaking to CNBC, John Glover, chief investment officer of crypto lending firm Ledn, anticipates that many recipients will cash out to secure their profits.
“Many will clearly cash out and enjoy the fact that having their assets stuck in the Mt. Gox bankruptcy was the best investment they ever made,” said Glover.
He expects some investors to “take the money and run.”
Approximately 0.7% of the total 19.7 million Bitcoins in circulation are returned to Mt. Gox creditors.
James Butterfill, head of research at CoinShares, noted the market’s sensitivity to the $9 billion Bitcoin release, which has long been a concern for bullish investors.
“Consequently, the market is highly sensitive to any related news. With the announcement that the Trust will begin selling in July, investors are understandably worried,” said Butterfill.
Historically, Bitcoin has reacted to large redemptions from centralized trading platforms.
For example, last month, Gemini returned over $2 billion worth of Bitcoin to users from its Earn lending program, impacting Bitcoin prices.
JPMorgan analysts suggest that the bulk of Mt. Gox liquidations could occur in July, potentially pressuring crypto prices before a rebound in August.
Similar trends were observed when the German government sold 5,000 Bitcoin, contributing to market pressures.
Also Read: Why Is Bitcoin Up On Monday?
Why It Matters: Despite concerns, some analysts believe the impact on Bitcoin prices will be short-lived.
Lennix Lai, chief commercial officer of OKX, stated that many early Mt. Gox users are long-term Bitcoin enthusiasts less likely to sell immediately.
Butterfill added that the market’s liquidity, with a daily trading volume of $8.74 billion on trusted exchanges, should cushion any mass sell-offs.
Jacob Joseph, a research analyst at CCData, noted that not all holdings would be liquidated, reducing overall selling pressure.
Alex Thorn, head of research at Galaxy Digital, echoed these sentiments, predicting fewer coins will be sold than expected.
“Even if only 10% of the Bitcoin distributed is sold, it will have a market impact,” said Thorn.
Vijay Ayyar, head of consumer growth for Asia-Pacific at Gemini, suggested the impact might be spread over time due to the varied nature of the recipients, including claims funds that will distribute Bitcoin to their limited partners gradually.
Bitcoin’s recent declines are also influenced by broader macroeconomic factors.
The cryptocurrency surged past $70,000 earlier this year following the SEC’s approval of the first spot Bitcoin ETF.
However, outflows from Bitcoin ETFs and significant market liquidations, coupled with the Federal Reserve’s revised interest rate forecast, have contributed to investor anxiety.
Butterfill pointed to the Fed’s rate cut plans as a likely reason for Bitcoin’s recent price drop, affecting the typically low-volume summer months.
Nevertheless, he maintained that “the fundamental investment case remains very much intact.”
The forthcoming Benzinga Future of Digital Assets event on Nov. 19 will offer a platform to delve deeper into these market dynamics and explore the future trajectory of digital assets, providing valuable insights amid this evolving landscape.
This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Image: Shutterstock
Read Next:
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
