Bitcoin dips below $57,000 as Mt Gox starts moving billions worth of BTC

Bitcoin price fell further below the $57,000 mark on Thursday night after defunct crypto exchange Mt Gox moved nearly 47,229 BTC ($2.71 billion) to another wallet address.

The largest cryptocurrency fell 3.45% in the past 24 hours to trade at $56,851, according to The Block’s bitcoin price page. Around 8 p.m. EST, defunct crypto exchange Mt Gox moved bitcoin worth $2.71 billion from its cold storage to an address.

Crypto traders are closely watching payout updates from Mt Gox, as well as movements made by the U.S. and German governments, which are among the largest known state holders of bitcoin.

In late June, the defunct bitcoin exchange said it would begin distributing over $9 billion worth of funds in bitcoin, bitcoin cash and fiat currency to its creditors from early July. That would be around 142,000 bitcoin ($8 billion), 143,000 bitcoin cash ($45.9 million) and fiat currency worth 69 billion Japanese yen ($428.7 million).

Peter Chung, head of research at Presto Research, said that Mt Gox creditors mainly consist of claim funds, defunct crypto exchange Bitcoinica and individual creditors. “We believe they are largely diamond-handed hardcore BTC investors and therefore selling will be limited,” Chung told The Block.

“The LPs for the claim funds (e.g. Fortress) are wealthy bitcoin OGs looking to accumulate more at a discount. Bicoinica can't do anything with their assets until they go through their own bankruptcy process,” Chung added. “The current group of individual investors are also diamond-handed because they have resisted the aggressive bidding from the claim funds over the last 10 years. Weak-handed creditors had plenty of chance to exit, and they likely all have.”

Selling pressure

The Mt Gox payout has been pegged as a major reason behind bitcoin’s recent bearish performance. Some experts predicted bitcoin’s price to continue its decline as the increased supply of 142,000 BTC into the market would add selling pressure to traders.

“Although creditors will likely sell their BTC from Mt Gox, the selling pressure may not be as big as many expect, since creditors could have sold their claims earlier on bankruptcy claim markets,” said Nick Ruck, head of growth of BitU Protocol. “Bitcoin is perhaps the most liquid digital asset market that can absorb this pressure, and there is still demand for cheaper prices in the short term, as many expect a continued bull market in the long run.”

Chung of Presto explained that the Mt Gox repayment is set to take place between July and October, “so one can use that as a reference” when it comes to how long the selling pressure might last.

“That said, the selling pressure will be stronger for BCH than BTC, given BCH doesn't have a strong investor base like BTC, so the creditors will probably seek to cash out immediately just like any other airdrop. Plus its market liquidity is much thinner than BTC — as low as 1/50th,” Chung said. “Our estimate shows the BCH selling pressure (measured as a percentage of the average trading value) will be four times larger than BTC.”

“The Mt Gox distributions were one of the biggest overhangs in the market for quite a long period of time,” Ben El-Baz, managing director of HashKey Global, told The Block. “Personally, I think it’s long-term bullish though this overhang will finally get cleared out as the distributions start in July. There’s still a lot of long-term structural market factors to stay positive on, like the expansion of more institutional friendly ETFs, changing interest rate policy, and the possibility of a growing shift in crypto policy in the U.S.”

Analysts at JP Morgan said last week that they expect Mt Gox creditors to sell part of their bitcoin receivables, which in turn would pressure the market. Nonetheless, the analysts said they anticipate a recovery from August.

Mt Gox, established in 2010, operated the largest bitcoin exchange in the world until the platform suffered a major security breach in 2014, resulting in the loss of at least 850,000 bitcoin.

Update: Added more comments from analysts