Bloodgood's Notes #133
Mt. Gox update, has Bitcoin formed a low? , spot Ether ETF starts in a week and more
Fundamental Overview
I mentioned some Mt Gox FUD a month ago, when it didn’t have much of an impact on the market—back then, they were just transferring funds to a new wallet without any updates on the distribution date—but this week, that topic came back with a vengeance. On Monday, the Mt Gox bankruptcy trustee announced that reimbursements are set to begin in early July, a bit more than ten years since the exchange went under in February 2014. This means that $9 billion worth of BTC will be distributed to creditors, which is worrying especially since BTC was trading at under $600 at the time the exchange ceased operations.
Given that creditors are sitting on unrealized gains to the tune of 100x, it’s natural to think that many of them would jump on the opportunity to sell, but there are two reasons why the market impact could be smaller than anticipated. First, Mt Gox creditors are largely Bitcoin OGs—not exactly the crowd to instadump their coins. Second, some of those that needed the money have already sold their claims in the meantime; while the people that bought claims can also sell of course, their cost basis is much higher (especially if they bought the claims more recently).
Hence, some of the weakness on BTC recently might have been a result of insiders front running the Mt Gox announcement. Meanwhile, the climate of peak fear created by this dreaded headline led to an incredible dump on Monday, with about negative $4 billion net delta (market buys minus market sells) across major exchanges. We all know about “buy the rumor, sell the news” when it comes to bullish headlines, but—depending on the details of the reimbursement process—we might see something similar play out in the other direction.
Bitcoin
Has Bitcoin formed a higher low?
Bears continue to be strong as Bitcoin dropped below $60k at the beginning of the week. The level we discussed in the previous issue, as well as in others, has been reached. Now, we can just wait and see what happens. We got a strong bounce from the level, however, if bulls do not follow through on this, we might just end up back below it.
Closing below $60k means just one thing for altcoin traders: a painful summer. Otherwise, it’s fun times ahead.
SPX, Gold, and DXY
Stocks continue their bullish momentum.
It's fair to say there is no change since last week, and stocks keep going up; at the moment, there is no sign of reversal.
Gold, on the other hand, is fighting to stay inside the range. Bulls are defending the level; however, there is no follow-up that would lead gold to the range high anytime soon.
DXY is in no man's land. No one knows whether a breakout or breakdown will happen at this point, however, we remain above an important level which will be of key importance in the near future.
Ethereum
Ethereum is fighting to stay above its $3,300 level.
This is a good sign for bulls and an important indication that the $3,300 level is critical and will be defended for as long as possible. On the ETH/BTC chart, we can see that we are back at the 0.055 BTC level, showing that we should not discount Ethereum quite yet.
Although summer might be boring, at least if we are looking at past years, we can still expect some important moves from both BTC and ETH.
Concluding notes
When it comes to the ETFs, everything is still on track for the spot Ether ETFs to start trading within roughly one week, with even Gensler himself commenting that, while he can’t say anything about the specific timing, the process is “going smoothly.” Meanwhile, the Bitcoin ETFs finally had barely positive net flows on Tuesday and Wednesday, breaking the red streak that saw at least $100 million of outflows every day since June 13. Seasonality is still a headwind for crypto, but maybe the panic created by the recent dump was enough of a flush for now. If BTC just manages to keep ranging for a while and ETH performs well with the ETF launch and inflows, we could be looking at some really good opportunities with altcoins.