While almost every outlet covering cryptocurrencies has pointed to a possible “later than expected approval” of a spot Bitcoin ETF as the cause for the flash crash that enveloped the entire crypto sector today, I feel there is more to the story. Because ultimately the ETF’s still have just as strong of a chance of approval as ever and a slightly longer timeline should not have caused such a severe sell-off.
Another theory put forth by the Wolf of All Streets points out that the exceptionally high positive funding rate on perpetual futures contracts is a major factor in the current situation. In crypto perpetual trading, the funding rate adjusts futures contract prices to reflect the difference between the spot price of the underlying asset, such as Bitcoin.
Mt. Gox victims reportedly starting to see reimbursement
The long-awaited reimbursement from the hack of the now defunct Bitcoin exchange Mt. Gox may be finally underway. The Bitcoin exchange that held more market share than any other at the time and to this day once handling 70% of all bitcoin purchases and sales until an earthquake hit the exchange along with the entire Bitcoin community. In a single epic hack during the summer of 2013 approximately 850,000 Bitcoin that were under the custody of Mt Gox disappeared. The exchange was able to recover a portion of the stolen funds, but in the end, Mt. Gox was on the line for approximately 647,000 Bitcoins.
Analysts have anticipated the effect that this amount of BTC coming into the market and possibly be sold in a short window of time could do to the price of BTC. Sales of large sums of BTC from the United States Government had a dramatic negative effect on pricing during March 2023 when sales of BTC recovered from the infamous Silk Road hacker helped to take BTC down by nearly 25% that month.
Around 9 days ago reports began popping up on a Reddit thread labeled “r/mtgoxinsolvency” created in Feb. of 2014 the thread has been detailing the ongoing process of reimbursing those that lost coins and funds as a result of the Mt. Gox hack.
So far, it appears as though only cash repayments have begun to take place, specifically through victims that have registered a PayPal account with the firm responsible for reimbursement. Reportedly many of these first payments (paid in JPY) were issued in double and the company has asked for anyone that received double payments to return the second one. The official statement seems to point to the actual Bitcoin payments being processed sometime thereafter this year.
This ticking time bomb which officially had it fuse lit less than 10 days ago could very well have led to the sharp correction witnessed in Bitcoin.
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