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Ape Terminal Founder Hatu Sheikh Weigh in on Impending Mt Gox BTC Selling Pressure

19 June 2024 06:35, UTC

Ever since Bitcoin hit an all-time high (ATH) at $73,740 in March, the crypto king has been experiencing a lull in activity. Prices have since been ranging, with not much driving the sentiment and momentum.

According to crypto exchange Bitfinex, the slump in BTC prices over the last three months has been likely due to selling by long-term BTC holders. But now, the trend has been changing, with on-chain data showing that these investors are starting to accumulate Bitcoin yet again for the first time since Dec.

Additionally, 50% of long-term BTC supply is “inactive,” as per on-chain analytics firm CryptoQuant. As a result, Bitfinex analyst notes, “this correction phase now appears to be nearing an end.”

This comes as Spot Ethereum ETF prepares for its launch after initial approval, which is expected to bring in a rush of new demand and investor interest. But that may not happen until we’re closer to the US Presidential election.

The market is “in an awkward lull right now where positioning has mostly been allocated long, but the price is not considered attractive enough for new entrants. The way this usually works in crypto is: old positioning is flushed, price becomes attractive enough, the narrative then justifies price appreciation and new $,” shared trader Huss on X.

Amidst this, a potentially bearish overhang for Bitcoin and by extension the broad crypto market is the BTC lost in the Mt. Gox hack that is expected to be finally returned to its creditors in coming months.

Once the largest Bitcoin exchange, accounting for 70% of all BTC transactions, Mt. Gox was hacked in 2014. This resulted in the loss of over 880,000 BTC that were lost or stolen from the exchange. Soon after the hack, the company filed for bankruptcy. In 2021, Mt. Gox creditors reached an agreement with the Tokyo District Court regarding a rehabilitation plan, though the recovered BTC is yet to be distributed, which may finally happen this year.

Just last month, the defunct exchange moved more than $9.5 billion worth of Bitcoin into a new wallet, which raised hopes for potential repayments. 141,686 BTC were transferred from various cold wallets into one single wallet before being distributed to three different addresses. This was the first time in over five years that Mt Gox moved funds, further creating a buzz in the market.

Mt. Gox rehabilitation trustee Nobuaki Kobayashi confirmed that this consolidation had been part of the exchange’s repayment plans. Creditors have been promised an October 2024 end deadline for reimbursement.

For now, this is the biggest narrative in the crypto market besides the November elections, which is expected to cause volatility in not just crypto but broad markets. As such, the market is trying to speculate the implications this repayment can have on prices as creditors are most likely to sell their BTC at a huge profit.

At the time of the hack, BTC’s price was around $700, and after a decade, it has seen a 100x surge as the largest crypto asset by market cap of $1.3 trillion trades around $70,000. This presents a big headwind for Bitcoin prices.

According to CryptoQuant, the eventual payment can influence market dynamics but it all depends on the size, timing, and manner of the payments. After all, a significant amount of Bitcoin will be introduced in the market which can affect price and liquidity.

“It remains to be seen just what creditors are going to do with their BTC. But it should be expected that after a decade of waiting and having their initial investments turn 100x, Mt. Gox creditors will finally realize some profits, if not most. Given that BTC has hit a new ATH, selling should also be expected in anticipation of a multi-year bear market,” said Hatu Sheikh, the founder of crypto launchpad Ape Terminal. “But then, Bitcoin” HODL" ers have been known for their ’diamond’ hands, and long-term holders are likely to keep their stash, so it might not be as severe."

He further pointed out that now we have Spot Bitcoin ETF flows that’ll cushion the market from these sellings. Also, after the boring, range-bound summer, prices should see a rebound in the fall and create excitement and new highs, further delaying the sellings and muting the pressure.

When it comes to Spot Bitcoin ETFs, while they are seeing positive flows, they remain muted with both BlackRock and Grayscale seeing zero inflows while the total inflow was just over $105mln on June 3rd. Still, BlackRock is now the world’s largest Bitcoin ETF with 291,567 BTC whose inflows account for 26% of the asset manager’s total year-to-date inflows. Meanwhile, Fidelity’s Bitcoin ETF inflows account for a whopping 56%.

While the momentum has slowed down for now, the ETFs are here, and we are likely to see those traditional finance players who were reluctant to get in finally make their moves. Already, hundreds of institutional investors have revealed their allocation to these products in Q1. Wisconsin’s pension fund also invested in BlackRock’s IBIT and Grayscale’s GBTC.

So, as these intuitions slowly but surely get in and weaker-than-expected US economic data raises expectations for the rate cut later this year, we are looking for good times ahead, but, of course, not without turbulence.