[TL;DR]

Many analysts generally believe that the Mt. Gox compensation event will bring some selling pressure, but due to the dominance of long-term holders, some creditors choose to write down, the compensation amount is lower than expected, and other factors, this impact will be manageable and short-lived.

The US government recently transferred about 4,000 bitcoins through an exchange, with a market capitalization of up to 240 million US dollars. This operation directly caused a sharp 6% drop in the price of Bitcoin in a short period of time.

With the recovery of market sentiment and the emergence of favorable factors, the price of Bitcoin is expected to rebound in July.

Introduction

Recently, a large amount of Bitcoin has been flowing from important government institutions and early miners around the world to trading platforms. This trend has triggered market selling anxiety, especially the bankruptcy liquidation of Mt.Gox, known as the "Bitcoin burden," and the selling off by the governments of the United States and Germany, deepening the market's atmosphere of concern.

So will the encryption market continue to decline in the future, when will the selling pressure end, this article will provide a detailed interpretation.

Mt.Gox creditors repayment plan to begin in July

Mt.Gox was once the world's leading Bitcoin exchange, which suffered the largest-scale Bitcoin theft in history in 2014, losing approximately 940,000 bitcoins. This incident led to the bankruptcy of the exchange and it was mired in legal disputes and bankruptcy proceedings for a long time.

Recently, there has been progress in the Mt.Gox liquidation case. It is reported that the creditor compensation plan will officially begin in July. The liquidation involves the recovery of 141,868 bitcoins (15% of the total loss). Due to the significant rise in the bitcoin price (from $451 at the time of bankruptcy to $63,500 at the time of assessment), creditors will actually receive compensation in USD far beyond their expectations, increasing by 140 times.

Specifically, the compensation plan allows creditors to choose early compensation and accept 90% of Bitcoin (i.e. a 10% discount), with about 75% of creditors expected to choose this option, resulting in approximately 95,000 BTC being released to the market prematurely.

Figure 1 Source: Public Information

In fact, since the repayment plan was announced on June 24, the market has reacted with a nosedive. At that time, Bitcoin once fell below the $60,000 mark. On the 25th, the market exploded with news of compensation based on the value of Bitcoin in 2014, which quickly caused the price to plummet and then recover.

The governments of the United States and Germany have begun to open the dump mode one after another

In addition to the much-watched Mt.Gox liquidation, the market has also paid close attention to the national-level dumping of Bitcoin and Ethereum by the governments of the United States and Germany in recent times.

First, the German government announced on July 1 that it transferred 1,500 bitcoins to multiple cryptocurrency exchanges, worth up to $95 million. This move is interpreted by the market as a preparation by the German government for large-scale liquidation.

Subsequently, Arkham's analysis revealed that the German government conducted larger-scale Bitcoin liquidation on various exchanges, especially transferring around 65 million USD worth of BTC to the exchanges, indicating an increased selling pressure.

Figure 2 Source: ARKHAM

It is worth noting that despite selling about $150 million worth of Bitcoin in the past month, the German government still holds about $2.8 billion (44,692K BTC) worth of Bitcoin, which is also the sword of Damocles hanging over the longs.

At the same time, we see that the US government has adopted a different strategy. Monitoring shows that the US government has transferred 3375 Ethereum to an unknown address, which is seen as an adjustment to the management strategy of Ethereum funds.

More notably, the US government recently transferred about 4,000 bitcoins through an exchange, with a market value as high as 240 million US dollars. This move directly led to a 6% sharp drop in the price of Bitcoin in a short period of time.

Figure 3 Source: ARKHAM

Multiple liquidation sell-offs are coming, will Bitcoin fall before rising?

In addition to the selling pressure from Mt.Gox and the US and German governments, the recent selling behavior of some long-term Bitcoin holders (whales) is also noteworthy.

According to the latest data, these ancient miners have sold $1.2 billion worth of Bitcoin in the past two weeks, resonating with the selling of governments and institutions, collectively exerting significant pressure on market prices.

Figure 4 Source: Gate.io

It is not difficult to find from the above chart that the current Bitcoin market is experiencing a severe fluctuation caused by the long selling, involving multiple aspects such as government, long-term holders, and early miners, and the price is intuitively responding with weakness. As a result, many people are beginning to worry about whether the critical point of selling pressure in the next stage will trigger a second round of Bitcoin price decline.

Overall, in the current macro liquidity is still not loose, the expectations of multiple heavyweight Bitcoin dumps and the positive progress of spot Ethereum ETF are interwoven, but considering Bitcoin's natural dominant position, the potential impact of the Mt. Gox incident on the market is more significant, which may further suppress market sentiment.

However, it is worth noting that despite the surge in selling pressure in the short term, most early miners may still choose to hold for the long term rather than sell off completely, so the pressure to sell is expected to be relatively controllable. Even in the long run, the current market volatility may be just a temporary adjustment. With the restoration of market sentiment and the emergence of favorable factors in the future, Bitcoin price is expected to rebound in July.

Figure 5 Source: @ali_charts

From a deeper perspective, the recent series of sell-offs not only reflects the change in market participants' behavior, but also reveals that the Bitcoin market is gradually returning from being driven by macro data to being driven by supply and demand conditions and recent industry events. These pressured structural changes are expected to further solidify the pump of Bitcoin. After the market accumulates energy, it is expected to clear the subsequent resistance.

Undoubtedly, we have entered a period that requires cautious handling. Although the short-term outlook is not optimistic, driven by favorable factors such as institutional investors increasing their purchasing power, the collapse of the presidential election, and a relaxed regulatory environment, there is hope for a stable recovery in Bitcoin prices.

Author: Carl Y.

This article only represents the author's point of view and does not constitute any trading advice.

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