Bitcoin (BTC) is usually less volatile than altcoins, but this Monday saw a notable exception. Bitcoin marked a more serious decline than other cryptocurrencies, leading to a significant drop in its market dominance. This decline underscores concerns about the potential impact of the upcoming payments to victims of the 2014 hack against Mt. Gox.
BTC’s market dominance, or its share of the total cryptocurrency market value, fell to 54.59% as of June 25, with the largest single-day drop since January 12. This suggests that investors are withdrawing funds from Bitcoin at a faster pace than from other cryptocurrencies.
The sell-off, according to many analysts, was triggered by the news that the defunct cryptocurrency exchange Mt. Gox plans to distribute 140,000 BTC to hack victims in July. This announcement fueled concerns that recipients may sell their holdings upon receipt, potentially leading to price declines.
These concerns were further exacerbated by increased selling pressure from miners and outgoing flows from spot Bitcoin exchange-traded funds (ETFs) since June 7.
The heightened fears of sell-offs also stimulated demand for short-term put options for BTC on the Deribit exchange, tracked by Amberdata. Put options provide protection against a decline in the asset’s price. The seven-day and one-month put-call skews, which reflect the premiums traders are willing to pay for asymmetric payouts in either direction within a week and a month, became negative, indicating increased demand for put options.
Despite these concerns, some market observers believe that the actual selling pressure from Mt. Gox compensations may be more moderate. Tagus Capital noted in a market commentary that while the exact amount of Bitcoin to be distributed following potential token sales from Mt. Gox is unspecified, it is part of a broader recovery plan that includes 142,000 BTC, 143,000 Bitcoin Cash (BCH), and fiat currency totaling 69 billion Japanese yen ($432 million).
Tagus Capital also assumes that Mt. Gox creditors may prefer to hold onto their BTC rather than sell immediately. These creditors are considered long-term investors who have previously rejected offers for payouts in US dollars and may prefer to hold onto their assets to avoid capital gains taxes upon sale.