Since March 7, within a 48-hour span, the price of bitcoin decreased from $10,600 to $8,300, recording a staggering $2,300 drop in value. The entire market followed bitcoin’s price trend, as the three largest cryptocurrencies behind bitcoin in Ethereum, Bitcoin Cash, and Ripple all declined by 11 percent, by the same exact margin as bitcoin.
Analysts like WhalePanda have attributed to the recent fall to the massive sell off of bitcoin by the Mt. Gox trustee, and the controversial decision of the trustee to sell 40,000 bitcoin on a cryptocurrency exchange, rather than over-the-counter (OTC) platforms.
“MtGox was terrible and the incompetent way they are handling is terrible, saying that Bitcoin has been crashing since all-time high because of it is just silly. It’s only’ 40,000 BTC. It is about the same as claiming that Tether caused the run to $20k. People love their narratives though,” said WhalePanda.
However, the sale of 40,000 bitcoin is not the end of the Mt. Gox trustee’s sell off of bitcoin. According to the official document released by the Mt. Gox trustee, more than $1.7 billion worth of bitcoin is expected to be sold in the next few months.
The official document of the Mt. Gox trustee referring to Bitcoin Cash as BCC read:
“As a result of the consultation with the court, I considered it necessary and reasonable to sell a certain amount of BTC and BCC at this point and secure a certain amount of money for distribution resources, and thus, I sold the amount of BTC and BCC above. I made efforts to sell BTC and BCC at as high a price as possible in light of the market price of BTC and BCC at the timing of sale. I plan to consult with the court and determine further sale of BTC and BCC.”
If the Mt. Gox trustee continues to dump large amounts of bitcoin on cryptocurrency exchanges rather than in the OTC market wherein big buyers can trade with each other, the price of bitcoin will continue to be affected by the sale.
Ethereum co-founder and Cardano founder Charles Hoskinson stated that bitcoin may have been overvalued at $19,000 if a short-term sell off by a single entity could lead the price of the cryptocurrency to fall by a margin like this, emphasizing the liquidity problem in the cryptocurrency market.
“Was bitcoin really worth $20,000 a coin if an event like this has such a profound impact on the market? We need an index of how much the market can afford to liquidate without crashing for each cryptocurrency; call it the ΔL metric,” said Hoskinson.
It remains unclear whether the Mt. Gox trustee will dump over a billion dollars worth of bitcoin on exchanges as planned, or move to OTC market to prevent market manipulation.