Bitcoin Price Drops by 12% in the Last Week Due to Mt. Gox Repayments Overflowing Market

A recent downturn in the crypto market has been attributed to repayments made by Mt. Gox, the Tokyo-based exchange that went bankrupt ten years ago due to a hack. However, it has started returning approximately $8 billion in Bitcoin to creditors, causing a stir in the market. Matteo Greco, a research analyst at Fineqia International, noted that 47,228 Bitcoin from a Mt. Gox-associated wallet has been confirmed to have moved to a new address for repayments, with investors potentially facing up to a three-month wait to access the funds, leading to a selling frenzy among current holders.

Further exacerbating the situation is the transfer of Bitcoin to exchanges by the German and U.S. governments. Over a two-week period, wallet addresses linked to these nations have sent $737.6 million in Bitcoin to platforms like Coinbase, Bitstamp, Kraken, and Flow Traders. This Bitcoin is believed to have been seized by authorities in various criminal cases.

Despite reaching record highs of just over $73,000 in mid-March, Bitcoin has struggled to maintain momentum. The MVRV ratio, which compares market value to realized value, currently sits at around 1.5, implying an average unrealized profit of 50% among market participants, a significant decline from the value above 3 observed earlier in the year.

The selling pressure has remained high following the Bitcoin halving in April, where the rewards for miners were halved, leading to a decrease in rewards for minting new coins. While this pressure has shown signs of easing recently, it still outstrips demand, contributing to the short-term price decline.

If the current trend continues until the end of the week, Bitcoin will have experienced five consecutive weeks of decline, the longest since the bear market of 2022. Market participants are cautious, with Andrew Baehr, head of product at CoinDesk Indices, highlighting the potential impact of billions of dollars of supply hitting the market in the coming weeks.

Despite these short-term pressures, Baehr remains optimistic, likening the situation to cleaning dirty dishes, where market corrections are finite, and historical trends suggest a resolution is likely. He anticipates potential waves of new adoption that could bolster prices in the future.

Looking ahead, some in the market are eyeing a potential “Trump Trade” to revitalize the market. With speculation around a rally towards the end of the year in the event of the former president’s victory in November’s election, recent events such as a contentious presidential debate for President Joe Biden have led some to believe in the prospect of a crypto-friendly president.

In recent months, former President Trump has shown interest in the crypto industry, seeking advice from figures like Elon Musk and actively engaging with Bitcoin miners and accepting crypto donations for his presidential campaign. This engagement has fueled speculation about the impact of a potential “Trump Trade” on the crypto market.