Bitcoin Market Volatility and Mt. Gox Payout Concerns

Bitcoin’s Market Volatility

Bitcoin (BTC) is typically known for being less volatile compared to alternative cryptocurrencies (altcoins). However, on a recent Monday, the leading cryptocurrency experienced a more significant drop than its smaller counterparts, resulting in a noticeable decline in its market dominance. This occurrence highlighted concerns surrounding the potential impact of upcoming payouts to victims of the 2014 Mt. Gox hack.

On this particular day, BTC’s dominance, representing its share of the total crypto market value, decreased by 1.8% to 54.34%. This marked the most substantial single-day percentage decline since Jan. 12, based on data from the charting platform TradingView. Essentially, investors appeared to be withdrawing funds from bitcoin at a faster rate than from other cryptocurrencies. The price of BTC declined by nearly 5%, dropping to lows below $59,000 at one point, as indicated by CoinDesk data.

Factors Contributing to the Sell-Off

The sell-off of Bitcoin was not unfounded. News emerged that the defunct cryptocurrency exchange, Mt. Gox, intended to distribute 140,000 BTC to the victims of the hack in July. This development raised concerns that once the recipients received their payouts, they might opt to sell their BTC holdings, potentially leading to an oversupply in the market. These worries were exacerbated by ongoing pressures since June 7, including increased selling by miners and outflows from spot exchange-traded funds (ETFs).

The heightened sell-off concerns prompted a rise in demand for short-term BTC put options on the Deribit exchange. Put options offer protection against price declines in the underlying asset. Tracked data from Amberdata revealed that the seven-day and one-month call-put skews, which indicate traders’ willingness to pay for asymmetric payouts in upward or downward directions over specific periods, had turned negative. This shift signaled a renewed interest in acquiring put options.

Despite the apprehensions about the impact of Mt. Gox reimbursements, some analysts suggest that the actual selling pressure from these payouts may be more restrained. Tagus Capital noted that while the exact amount of Mt. Gox funds to be distributed in July remains unspecified, it is part of a broader reimbursement plan encompassing 142,000 Bitcoin, 143,000 Bitcoin Cash, and fiat currency amounting to 69 billion Japanese yen ($432 million). The company added that Mt. Gox creditors, who are long-term investors resistant to previous USD payout offers, might opt to hold onto their Bitcoin rather than sell, potentially due to concerns about capital gains tax implications.