The 2024 Outlook Report released by the digital asset data company CCData on July 2nd suggests that Bitcoin has not yet reached the peak of its current appreciation cycle and may reach a new historical high this year.
Bitcoin surged to above $73,000 on March 14th, reaching a historical high of $73,835, and has since fluctuated in the range of $58,000 to $70,000. As of the time of writing, Bitcoin is priced at $60,912.
Of particular interest to investors, the now-defunct Bitcoin exchange Mt. Gox recently announced that it will begin repaying investors in Bitcoin and Bitcoin Cash (a branch of Bitcoin created in August 2017) in early July 2024.
Market concerns are that once the repayment plan begins, users are likely to sell the “recovered” digital currency to secure their holdings, potentially putting further pressure on the upward trend of Bitcoin.
Mt. Gox Repayment Imminent
On June 24th, Mt. Gox announced that it will commence the repayment plan in July.
Mt. Gox, known as the “Wudaokou” exchange in China, is headquartered in Tokyo, Japan.
Ten years ago, the exchange was the world’s largest Bitcoin trading platform, accounting for about 70% of global Bitcoin trading volume.
In February 2014, Mt. Gox claimed to have been hacked, with approximately 850,000 Bitcoins stolen, the majority of which belonged to users, accounting for 88% or about 750,000 Bitcoins. At the time, the total amount of lost Bitcoins was approximately 11.4 billion yen based on the exchange rate. On February 28th, Mt. Gox filed for bankruptcy protection with the Tokyo District Court.
Subsequently, Mt. Gox claimed to have recovered 200,000 Bitcoins. After a lengthy legal process, the court ruled in 2019 to transfer over 140,000 Bitcoins to a trust for safekeeping, and negotiated with creditors to select a repayment plan.
It’s worth noting that over the past decade, the price of Bitcoin has skyrocketed from around $600 to the current $60,000.
The launch of the repayment plan means that the “recovered” Bitcoins that have been passively invested for a decade and have increased in value a hundredfold will become active assets.
John Glover, Chief Investment Officer of cryptocurrency lending company Ledn, stated that many people’s assets have been trapped due to the Mt. Gox bankruptcy, and for some, this may be their best investment. Some people are likely to take the money and run.
Many in the market are also concerned that with Mt. Gox creditors being compensated and selling some of their Bitcoin assets, this may put pressure on the price of Bitcoin.
Lennix Lai, Chief Commercial Officer of cryptocurrency exchange OKX, believes that the concern about selling may only be short-term, as many early users and creditors of Mt. Gox are long-term Bitcoin enthusiasts and are unlikely to immediately sell all of their Bitcoin.
However, CCData research analyst Jacob Joseph believes that the market is fully capable of absorbing the selling pressure, and its impact may have already been reflected in recent price trends.
According to Zhao Wei, a senior researcher at the OKX Research Institute, the Bitcoin value involved in the repayment plan is approximately $9 billion, equivalent to over half of the Bitcoin ETF inflows, which may have a certain impact on the market.
Furthermore, industry insiders have analyzed that given the market’s understanding and expectations of the Mt. Gox incident, as well as the long duration of the compensation plan, the actual impact may be limited.
Post-Halving Expansion Period?
At the beginning of this year, after the U.S. Securities and Exchange Commission (SEC) approved the first Bitcoin spot ETF, Bitcoin experienced a strong rally, breaking through $73,000 in mid-March, followed by a relatively weak trend with prices fluctuating above $60,000.
Regarding Bitcoin’s recent performance, the digital asset investment company CoinShares analysis suggests that the price trend is primarily influenced by the Fed’s recent dot plot, with a median forecast of only one rate cut for the remainder of 2024. While this does not have much impact on large tech companies, it affects small and medium-sized stocks, as well as Bitcoin and other interest-sensitive assets. In addition, the strong dollar has weakened Bitcoin’s momentum.
CoinShares also mentioned that Mt. Gox’s repayment plan may release a large number of Bitcoins into the market, while the German government has also begun selling Bitcoin, weakening market sentiment. It is worth mentioning that the German government is one of the significant holders of Bitcoin. According to on-chain analyst Yu Jin’s monitoring, the address marked as the German government has transferred 7,828 Bitcoins since June 19th, worth approximately $496 million.
In terms of the future, the CCData report suggests that trading activity in the third quarter may decrease, which could mean more sideways price movements. However, the data and previous trends indicate that sideways price movements will be temporary, and prices are likely to surpass previous historical highs by the end of the year.
“Prices are expected to fluctuate between $50,000 and $70,000 for the year, with the key factors being the timing of U.S. interest rate cuts and the trading volume of U.S. Bitcoin ETFs,” said Deng Jianpeng, a professor at the School of Law at the Central University of Finance and Economics.
The report also mentioned that after the fourth Bitcoin halving event on April 19th, Bitcoin’s price trend has remained in a range-bound state for the following three months, combined with a decrease in trading activities, leading to speculation that this market cycle has already peaked.
“However, historical trends indicate that halving events always herald the arrival of an expansion period in prices, with the rising period possibly ranging from 366 to 548 days based on previous data,” stressed CCData.
“Halving” is an important feature of Bitcoin. According to Bitcoin’s protocol, the total supply of Bitcoin is 21 million, and approximately every four years, the Bitcoin mining reward will be halved, with the main purpose being to slow down the production speed of new Bitcoins and maintain the scarcity value of Bitcoin.
As for the price trend of Bitcoin, Zhao Wei reminded that overall, Bitcoin prices are usually influenced by various factors such as the macroeconomic environment, regulatory dynamics, industry innovation, and investor sentiment.
Specifically, in terms of the macroeconomic environment, global economic recovery or recession trends could affect Bitcoin prices. In addition, the Fed’s policy is also a core factor affecting price trends. In terms of regulation, various countries are actively formulating regulatory policies, and although still in the early stages and full of uncertainty, with the gradual development of global regulation, the Bitcoin and crypto industry is expected to experience healthy development. In terms of industry innovation, innovative technologies based on Bitcoin’s native concepts are gradually permeating various fields. When these innovative technologies penetrate into people’s daily lives, the crypto industry centered around Bitcoin may usher in a new development stage.
Ethereum Spot ETF or Launch in July
On the other hand, the launch of Bitcoin ETFs has also made significant progress.
According to data from the crypto financial research service SoSoValue, as of the time of writing, the total net assets of 11 Bitcoin spot ETFs in the United States amount to $53.733 billion, with a historical cumulative net inflow of $14.639 billion. Spot Bitcoin ETFs allow investors to buy products that track Bitcoin prices without owning the underlying cryptocurrencies.
This month, the launch time of the Ethereum spot ETF has attracted considerable attention in the market. In June, U.S. SEC Chairman Gary Gensler stated in response to related inquiries, “I don’t know the specific timing, but progress is going well.” According to media reports, asset management companies are optimistic that the SEC may approve the first batch of spot Ethereum ETFs as early as mid-July.
Ethereum was launched in 2015, with its core feature being the application of “smart contracts.” When conditions are met, smart contracts will be executed automatically without any party knowing who the other party to the transaction is, eliminating the need for any intermediaries.
In terms of total market value, Ethereum is currently the world’s second-largest cryptocurrency. As of the time of writing, the total market value of Bitcoin is $1.2 trillion, while Ethereum is $402.2 billion, with the former being roughly 2.9 times the latter. The digital asset company Galaxy currently estimates that the inflow of Ethereum spot ETFs may be approximately one-third of the inflow of Bitcoin spot ETFs.
Deng Jianpeng believes that if the Ethereum ETF is launched, it will likely push up the price of Ether, and may also boost the price of Ethereum Layer 2 tokens. Price increases may also attract more investors and developers to participate in the Ethereum network, and stimulate other cryptocurrencies to apply for ETFs.
From the beginning of the year to the present, the price of Ethereum has risen from $2,281 to $3,341, a 46% increase, but with significant fluctuations in overall trends.
SFC