Bitcoin may head towards $50,000 as Mt. Gox prepares crypto repayment

By Frances Yue

Why bitcoin is plunging

Bitcoin on Friday plunged to the lowest level in over four months, as investors are concerned about potential selling following bankrupt crypto exchange Mt. Gox's repayment plan, which is slated to start this month, and the sale of bitcoin by the U.S. and German governments.

The largest crypto by market capitalization (BTCUSD) fell to as low as $53,701 on Friday, according to Dow Jones Market Data. Bitcoin is trading at around $54,308 at last check, down 6.8%. The crypto is still up 29% year-to-date, but is down over 26% from its record high at $73,798 set in March.

Meanwhile, BlackRock's iShares Bitcoin TrustIBIT, the largest bitcoin exchange trade fund in the U.S. by assets under management, fell 6.6% to around $32.17, on pace for its lowest close since Feb. 26. It is down three consecutive days, with a 10.6% decline over this period, on pace for the worst three day stretch since the three days ending May 1, when it fell 10.82%.

Last month, bankrupt crypto exchange Mt. Gox said it would start repaying crypto in July to creditors who lost assets in a hack of the defunct platform more than a decade ago. The payments will be made in bitcoin and bitcoin cash.

Launched in 2010, Mt. Gox was one of the earlier crypto exchanges and once the biggest digital asset exchange in the world. It was hacked in 2011, with over 600,000 bitcoins stolen, and the platform went bankrupt in 2014. Last year, the U.S. Justice Department charged two Russian nationals with conspiring to launder bitcoins from their hack of Mt. Gox.

Mt. Gox said in September of last year that the exchange faces a deadline on Oct. 31, 2024 to make basis repayments, early lump-sum repayments and interim repayments.

Mt. Gox on Thursday transferred over 47,000 bitcoin, which are worth more than $2.6 billion, from cold storage to another wallet, likely in a move to prepare the crypto for repayment, according to data from blockchain analytics platform Arkham Intelligence.

Investors are worried that Mt. Gox's creditors may choose to sell bitcoins they receive, putting pressure on the crypto, because bitcoin now trades at a much higher price than it did a dozen years ago.

Meanwhile, the U.S. and German governments have been sending bitcoin to digital assets exchanges in an effort to dispose of the crypto they seized from illegal activities, adding selling pressure on the coin. Last week, the wallet linked to the US Government moved 3,940 bitcoin to Coinbase Prime, according to Arkham Intelligence. On Thursday, the German Government moved 1,300 bitcoin to exchange deposits at Kraken, Bitstamp and Coinbase (COIN), in a series of similar efforts.

From the technical perspective, it's more likely for bitcoin to fall towards $51,500, at which level the crypto consolidated in February, than rising to $65,800, the crypto's 50-day moving average, noted Alex Kuptsikevich, senior market analyst at FX Pro.

The market is currently expecting most Mt. Gox creditors to sell the crypto they receive, noted Rachel Lin, chief executive and co-founder at SynFutures. However, if the selling ends up being lower than expected, bitcoin's price may see a bounce back, Lin said in emailed comments to MarketWatch on Friday.

"On the other hand, if there is enough selling to push the price lower, we might be looking at the $50,000 level soon," Lin wrote.

-Frances Yue

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07-05-24 1158ET

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