The crypto market continues its downward trajectory, closely linked with the latest updates from Mt Gox, a once-troubled exchange whose effects are still influencing market sentiments. A majority of investors have reacted negatively to Mt Gox’s recent statements, viewing them as long-term negative indicators, especially in light of the ongoing global economic challenges.
Mt. Gox Drives Crypto Market Down
In the last week, Bitcoin and most cryptocurrencies have exhibited negative trends, initially triggered by the announcement of data from the US Federal Reserve. This negative sentiment has persisted, leading to volatility among most risk assets, including cryptocurrencies. Unfortunately, the situation for cryptocurrencies, especially Bitcoin, has worsened due to internal market dynamics.
It was reported that Mt. Gox has issued a new update regarding compensation payments to its clients. Mt. Gox stated that it would distribute $9 billion in Bitcoin and Bitcoin Cash as compensation. This distribution is scheduled to start in July 2024, with the funds available for withdrawal until October 2024, indicating a phased distribution approach.
However, the majority of crypto investors perceive this as a negative sentiment that could significantly drive down crypto prices, particularly Bitcoin, in the coming month. The assumption is that the recipients of these funds will immediately sell them off, considering $9 billion a significant amount. This could potentially create new selling pressure, initiating a domino effect. However, there is a possibility that some compensation recipients will hold onto Bitcoin as an investment, which could mitigate a complete sell-off.
Unfortunately, this negative sentiment has already spread across the market, leading to panic and sell-offs among retail investors, compounded by sales from institutional investors.
According to the Fear and Greed Index, market sentiment is currently in a state of fear, indicating increased selling. Typically, investors and traders wait for an extreme fear state before re-entering the market, but the current fear state could be an early indication of a potential recovery, based on historical patterns.
The FUD surrounding Mt. Gox is not a new phenomenon, but what makes the current situation particularly severe is the confirmed payout schedule coinciding with a deteriorating macroeconomic environment.
Institutional Investors Continue Selling
In this environment, retail investors are also showing signs of instability due to the continued sell-offs by institutional investors. Data from Lookonchain related to Bitcoin Spot ETFs indicates that the majority of holders are currently selling.
This situation further deteriorates the investment climate in the crypto market, as following high-liquidity institutional investors is often considered a sound strategy. Given that many short-term traders are looking to capitalize on quick profits, it’s unsurprising that sell-offs are prevalent during such periods of FUD.
Over the past seven days, institutional investors have sold approximately $531.29 million worth of Bitcoin Spot ETFs, with $129.5 million sold just on June 24, 2024.
This scenario reflects that the prospects for market recovery are currently slim unless there is a sudden shift to positive sentiment. For those looking for short-term gains, it would be wise to align with institutional investors, especially when data from Lookonchain shows a resurgence in inflows. However, it’s crucial to remember that the risk of volatility remains high, requiring traders and investors to maintain disciplined risk management, as risks are borne individually.
