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Gox Watch
If the price of Bitcoin were a murder mystery, there would be several prime suspects.
Some analysts may say that macroeconomic factors were the reason for the collapse of cryptocurrencies.
Renewed recession fears, a potential AI bubble, and the Fed’s rate cuts in absentia have all hit the stock market. Why shouldn’t Bitcoin be reeling from the same effects?
Mt. Gox could be another potential culprit. Some 20,600 creditors waited 10 years to get their bitcoins back, during which time the price rose from under $500 to $58,000 when payments began in May.
To date, about $5.77 billion in bitcoin has been sent to participating crypto exchanges, based on the valuation at the time of the transfer. Any creditor who had $1,000 in bitcoin when Mt. Gox went bust would now have more than $110,000, based on distributions to date.
The numbers for how much is left vary between screeners, but my calculations suggest that out of the original 141,690 BTC ($8.15 billion at current prices), there are 51,957.7 BTC left — worth $3 billion. Any remaining bitcoin should be sent within the next two months or so.
For scale, the government of the German state of Saxony sent a total of $2.92 billion directly to exchanges and other OTC venues, which at first glance seemed to directly or indirectly affect the price of Bitcoin.
Saxony’s net outflows are marked in purple in the chart below. Note that these purple areas coincide with Bitcoin’s declines, and prices immediately rebounded after they ended.
Coincidentally, Bitcoin ETFs, particularly BlackRock’s IBIT, have seen significant inflows on some days, with Mt. Gox moving $3.07 billion to Kraken.
Which, all things considered, would hypothetically offset some of the sell-off by Mt. Gox creditors by the end of the day.
This just goes to show that plotting the exact impact of Mt. Gox payments on the price of Bitcoin requires a lot of guesswork. Payments are not made directly to individual addresses. Instead, Mt. Gox trustees route them to crypto exchanges, which then credit the Bitcoin directly to users’ accounts.
It’s just one click away from selling and even cashing out for fiat. And since hot wallets typically shuffle users’ funds into one address, once Mt. Gox’s bitcoin is there, it’s unlikely to do anything else.
Glassnode was still trying late last month. Its analysts compared Kraken and Bitstamp volumes during Gox distributions and found only a slight increase in sell-side dominance, and still within typical ranges.
However, there were also big whales among Gox’s creditors. Only twenty-three had claims on more than a quarter of the total funds ($2 billion at current prices), and the top 1% of creditors were due more than half.
If one of them decides to sell everything at once, on the public markets rather than over-the-counter, it is reasonable to assume that this could impact prices in the short term.
But suppose we had to pick Colonel Mustard from a list: macroeconomics, Mt. Gox, Saxons, the US government, or a Bitcoin ETF.
For me, it was the Bitcoin ETF in the candlestick conservatory. Investors have pulled more than half a billion dollars out of the ETF in the last three days — during which time the price of Bitcoin has fallen by 20%.
If the macro environment really did set up Bitcoin for a fall, ETFs could very well push it over the edge, especially if they were selling at the bottom. In that case, Bitcoin would have to rally again before Mt. Gox joined in again.
What a welcome to Gox creditors for returning bitcoins.
— David Kanellis
Data center
- BTC is over $57,300 USD after posting a 3.6% recovery over the past day, while ETH rose 0.7% to $2,485.
- HNT, FTN and LEO are the only ones three top 100 tokens in green over the last week – from 3.6% to 2.1%.
- A small increase in the number of Ethereum validators in the queue to exit: there are currently 286. from five at the beginning of the month.
- Open interest in Bitcoin on CEX is decreased by 25% — up to $28.2 billion from $37.5 billion — since the end of July.
- Uniswap has eclipsed Lido for collections received in the last week: from $24.43 million to $23.3 million.
Hot summer, hotter time
While politics and the role of cryptocurrencies in it have become a hot topic for many in the industry, entrepreneur Anthony Pompliano has a slightly different perspective.
“I think, with all the asset prices, the president is probably not as important as people think,” he told me.
He also has some TradFi evidence to back up his claims. The S&P 500 has returned during both the Trump and Biden presidencies (in terms of trading days): “It’s almost identical returns to within a percentage point,” despite operating in vastly different interest rate environments and possibly different markets.
So, okay, let’s say Bitcoin is going to hit all-time highs no matter who takes office next January. The real concern that many people have expressed is that the next president needs to be more crypto-friendly.
“But if you look at it from a net result perspective, this regulator has accomplished more for the crypto industry than all the crypto regulators to date,” Pomp says.
He cited examples of Coinbase going public (though they were later sued by the same regulators that oversaw their direct listing), miners going public, and the approval of Bitcoin and Ethereum ETFs (and while Gary Gensler wasn’t a huge fan, both ETFs eventually went public… after a legal battle).
“If you went to sleep ten years ago and woke up today and looked at the results and someone said to you, ‘Who do you think has been the best regulator or leader of regulators for the crypto industry?’ You would say that the current leadership teams at the SEC and CFTC have done more for the crypto industry than anyone else. While there is such skepticism, friction [and] “Even though it’s abrasive, the results are still better than anything we’ve gotten before,” he said.
There is no doubt, however, that the lack of regulatory clarity has also caused some damage to the industry. Take, for example, the NFT creators we talked about last week. They are forced to take action against the SEC simply to get answers about how the SEC is approaching NFTs after it targeted several projects.
Now look at developers: Electric Capital’s 2023 report found that 72% of developers are outside of North America, and the share of developers in the US has declined by 14% since 2018.
But when ETFs were mentioned, I couldn’t help but think of Pomp’s take on the potential SOL ETF.
“We believe that these assets will eventually end up in the public markets,” he said. “The big question is, what is that time frame? But again, people want them, and so when people want them, I tend to think that over time they [get what they want.]
“It may require a change in political leadership, it may require [different] “Regulatory guidance. In fact, it may require changing the companies that provide custody services or various services so that people feel comfortable. But ultimately, I think these types of altcoin ETPs will be approved.”
As for Pomp’s bullish sentiment, he told me that stablecoins are the “second-best fit to the market” of cryptocurrencies, right behind Bitcoin.
“Businesses are good as stablecoin issuers. And that means you have a lot of money. If you have a lot of money, you can invest a lot in R&D and development and so on. And that gives you a very long-term time horizon in your thought process because you know you’re going to be around in 2, 3, 4, 5 years, which is a big advantage. So I don’t see that demand going away. I actually see it continuing to grow and accelerate. And at some point, I think governments are going to say, ‘Yeah, you know, we’ve got to figure out how to do this.’”
Now all that’s left is to bring Circle to the public markets.
– Katherine Ross
Works
- Coinbase’s Paul Grewal says he wants cryptocurrency to remain non-partisan.
- Trump’s plan for government stockpiles Bitcoin experts are concerned, Bloomberg reports.
- BlackRock filed to list and trade options on its spot ether ETF.
- Former Binance Advisor David Plouffe joined Kamala Harris’ campaign.
- Go to trading CoinDesk reports that millions of ETH continue to move.
Riff
Q: How can cryptocurrency become a channel for a “hot coin summer”?
Turn all smart money into dumb money.
If the recent call for infrastructure funding was smart money and caution, now is the time to be stupid.
The dumber the better, within reason. No need to support projects with questionable tokenomics and absurd bonding curves.
There’s simply been a seasonal resurgence of some of the most ostentatious crypto startup pitches we’ve seen in the last decade.
Cryptocurrency for dentists. Stablecoin pegged to the price of urea. Tokenized people. Burning picassos to turn them into NFTs. Crypto-seasteading.
The hot summer of coins means pulling off publicity stunts. Whatever your idea, it could be just what crypto needs.
— David Kanellis
Q: Can I use Cozy Coin Fall instead?
This summer has been very European in my humble opinion. Everyone is out of the office all the time and enjoying life. Compared to last summer when there were a lot of stress tests (thanks to some regulator suing Coinbase and Binance). I guess I should be grateful.
Either way, we just need to wake ourselves up a bit if we really want a hot summer of coin. Need to rev up, maybe throw in a few positive catalysts to lift the mood. Oh, and people coming back to their desks will help, too.
– Katherine Ross
