On July 24, Bitcoin (BTC) fell over $1,400 in two hours, increasing its 24-hour loss to 2.1%. Mt. Gox’s continued repayment of its creditors may have played a large role in this decline.
Let’s take a closer look at the factors driving down the Bitcoin price today.
Mt. Gox Begins Refunding 140K Bitcoins
Today’s Bitcoin price drop comes as Mt. Gox begins repaying over 140,000 BTC, or about $8.5 billion, to its creditors.
It is worth noting that, according to a Telegram group of Mt. Gox creditors, creditors of the shuttered cryptocurrency exchange began accepting Bitcoin and Bitcoin Cash (BCH) redemptions from the Kraken cryptocurrency exchange on July 23.
The repayments came after a Japan-based cryptocurrency exchange moved 47,500 bitcoins, worth about $3.2 billion, to two unknown addresses on July 23.
At the same time, the US government moved 58.74 BTC, worth about $4 million, to Coinbase Prime, sparking speculation about its purpose.
According to Arkham Intelligence data, Mt. Gox’s BTC holdings currently stand at around 85,234 BTC, worth $5.7 billion.
After the shuttered exchange released its repayment report on July 5, the exchange set out plans to repay its creditors “immediately,” and that appears to be progressing smoothly.
A Mt. Gox wallet labeled “Mt. Gox: Cold Wallet (1Jbez)” sent 48,641 BTC, worth approximately $3 billion, to Kraken on July 16 for distribution to creditors.
The exchange expected creditors to recover their funds within one to two weeks.
Mt. Gox creditors have been waiting for more than a decade to be repaid, and in that time the price of BTC has soared by over 10,000%. Fears that this additional supply of Bitcoin will be sold off as soon as it enters circulation have put downward pressure on the market.
Hong Kong Launches Bitcoin Futures Inverse ETF
Hong Kong launched Asia’s first Bitcoin futures inverse product, the CSOP Bitcoin Futures Daily (-1x) Inverse Product (7376.HK) on July 23.
A new exchange-traded fund (ETF) from CSOP Asset Management, one of China’s largest asset management firms, aims to give investors a way to profit from falling Bitcoin prices.
The ETF achieves this by taking a short position on Bitcoin futures contracts on the Chicago Mercantile Exchange (CME). Its value increases as the price of Bitcoin falls, providing a way to bet against the performance of Bitcoin. It is denominated in US dollars and traded on the Hong Kong Stock Exchange (HKEX).
This development follows the successful launch of the CSOP Bitcoin Futures ETF (3066.HK) in December 2022, which will see the company expand its operations in the Asia Pacific region.
The launch of a Bitcoin futures inverse ETF in Hong Kong would provide investors with a new tool to bet on Bitcoin, which could indirectly put pressure on the Bitcoin price and potentially lead to increased selling activity.
Related: Bitcoin Trader Warns Local BTC Price Peak After $530 Million ETF Inflows
Over $150 million worth of leveraged long positions were liquidated.
The Bitcoin price drop today is due to a massive liquidation of long positions in the cryptocurrency futures market.
In particular, in the broader market, long liquidations were over $159 million over the past 24 hours, while short liquidations were $40 million. Similarly, over $24 million of long BTC positions were liquidated over the same period, while short liquidations were $13.93 million.
Long liquidations occur when traders are forced to sell assets to close out long positions, further adding to selling pressure in an already bearish market.
Interestingly, the liquidation of long positions coincides with a decline in Bitcoin futures open interest (OI) and funding rates. As of July 23, the total number of BTC open futures contracts stood at $36.75 billion, down from $37.2 billion a day earlier, according to additional data from Coinglass. Meanwhile, the funding rate fell from 0.24% to 0.12% per week over the same period.
The decline in funding rates and OI suggests that traders are avoiding new risk, reflecting a more cautious market outlook.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.