Concerns are mounting that the selling pressure from Mt. Gox’s bankruptcy redemptions could significantly impact the prices of Bitcoin and Bitcoin Cash, according to a report by Kaixo Research.
The defunct exchange Mt. Gox is set to return approximately $9.5 billion in Bitcoin (BTC) and 143,000 Bitcoin Cash (BCH) worth around $73 million to its customers. This long-anticipated move has created market uncertainty, as investors speculate on the potential sell-off and its repercussions.
Kaixo Research noted an increase in selling pressure on Bitcoin Cash on Binance and OKX, particularly at the end of Asian trading hours on July 4. This surge in sell orders occurred ahead of the official repayment announcement.
The liquidity impact on Bitcoin Cash was apparent, with price slippage for a simulated $100,000 sell order hitting a one-month high across most exchanges. The lack of order book depth to handle large market orders exacerbated liquidity issues, with the highest slippage observed on Itbit and Bybit. On July 5, slippage for BCH rose from 0.2% to 2.8% on Bybit and from 0.3% to 3.5% on Itbit.
“Strong selling pressure linked to the Mt. Gox repayment event has significantly affected BCH liquidity,” stated Kaixo Research, highlighting the broader market reaction to the news.
Mt. Gox, once the leading crypto exchange managing over 70% of all Bitcoin transactions, declared bankruptcy in 2014 following a hack that resulted in the loss of approximately 740,000 Bitcoin. The announcement of these repayments has intensified selling pressure on Bitcoin and the broader cryptocurrency market, with Bitcoin hitting a five-month low and triggering the liquidation of over $580 million in bullish bets.
Approved exchanges for processing repayments include Bitbank, BitGo, Bitstamp, Kraken, and Japanese exchange SBI VC Trade.
Analysis:
The market’s reaction to the Mt. Gox repayments offers both risks and opportunities for investors. The anticipated sell-off could lead to short-term price drops in Bitcoin and Bitcoin Cash, presenting a potential buying opportunity for investors who anticipate a market rebound. However, the liquidity issues highlighted by Kaixo Research underscore the importance of cautious trading and robust risk management strategies.
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