Bitcoin (BTC) is generally less volatile than altcoins, but there was a significant exception on Monday. The drop in Bitcoin was more severe than other cryptocurrencies, leading to a substantial decrease in its market dominance. This decline highlighted concerns about the potential impact of an impending payout to Mt. Gox hacking victims. As of May 25, BTC’s market dominance dropped to 24% of the total cryptocurrency market value, marking the largest single-day decline since March 12. This indicates that investors are withdrawing funds from Bitcoin at a faster rate than from other cryptocurrencies.
Many analysts attribute this selloff to the news of the closure of the cryptocurrency exchange Mt. Gox, which plans to distribute 140,000 BTC to hacking victims. This announcement raised concerns that the recipients might sell their holdings upon receipt, potentially leading to a price drop. The increased selling pressure from miners and the outflow of funds from the Bitcoin exchange-traded fund (ETF) further exacerbated these concerns since July 7.
The worries surrounding the selloff also stimulated the demand for short-term BTC put options on the Deribit exchange tracked by Amberdata. Put options provide protection against asset price declines. The spread between 7-day and 1-month call options turned negative, indicating an increased demand for put options.
Despite these concerns, some market observers believe that the actual selling pressure from Mt. Gox may be more moderate. Tagus Capital suggested that the potential distribution of Bitcoin after the Mt. Gox token sale, part of a broader recovery plan, including 142,000 BTC, 143 Bitcoin Cash (BCH), and a total of 6.9 billion Japanese yen (432 billion US dollars) in fiat currency. They also assumed that Mt. Gox creditors may be more inclined to hold onto Bitcoin rather than sell immediately to avoid capital gains tax, as they are considered long-term investors who previously rejected offers to be paid in dollars.