Careless Bankruptcy Trustees and Market Movements
Over the last week, cryptocurrency markets have seen a sharp downturn, led by Bitcoin's almost 8% sell-off, dropping the currency below the $8,500 price point. While often the cryptocurrency market seems unstable and random, have faith that it works in a very similar manner to a stock market, where markets often react to information that the everyday user simply is not in posession of. This past week is a prime example of that type of market movement.
Over the last week, 8,200 Bitcoins were dumped on the market, seemingly originating from the Mt. Gox wallet. For those that don't remember, Mt. Gox was one of the most famous Bitcoin exchanges, known as much for its market domination in its prime as it is for its verified hack in February of 2014 which saw 850,000 Bitcoins (over $473 Million at February 2014 price and representing about 7% of all Bitcoins) pilfered.
Since its famous hack, almost 200,000 of the 850,000 bitcoins have been recovered. These are being used to repay victims of the theft. This past week, it would seem that the trustees ordered to liquidate the Bitcoin began to do so. Typically, such liquidations are done through the "OTC" or over-the-counter market. This allows retail and institutional investors to make arrangements with the trustee to purchase the Bitcoins in such a way that it does not negatively impact the price, which owuld be expected from very large asset offloads such as this one. Instead, the trustee has decided to liquidate the 8,200 Bitcoins using standard open cryptocurrency retail exchanges, resulting in the dramatic drop in value witnessed over the last week.
It is only through tracing some of the larger transactions that the source of the coins can be determined, and this can only happen post-sale (this is one of the beautiful things about the distributed ledger known as blockchain!) Armed with this knowledge, we can see that the recent market dip is not a reaction to any kind of recent negative sentiment toward cryptocurrency, but rather a careless bankruptcy trustee performing the task for which they were appointed. The unfortunate side-effect of this carelessness is that the dip affected not only Bitcoin but the entire cryptocurrency market in general, bringing the price down on other popular currencies including Litecoin, Ethereum, Dash, and many others.
In early trading on Monday, crytpocurrency has already seen a slight bounce back, with Bitcoin at $8,742.80 at the time of this writing. Rest assured, there are plenty of more gains to be experienced in cryptocurrency as the year progresses.