- JPMorgan analysts forecast that the imminent distribution of Bitcoin by Mt. Gox might exert temporary downward pressure on the market.
- The analysts predict that some Mt. Gox creditors will sell portions of their Bitcoins, initially creating a bearish sentiment.
- JPMorgan anticipates a market recovery starting from August despite the short-term sell-off pressure.
JPMorgan predicts temporary market pressure from Mt. Gox Bitcoin distributions, with an expected recovery by August.
Mt. Gox Bitcoin Distribution: Potential Market Impact
JP Morgan analysts have speculated that the distribution of Bitcoin by the defunct cryptocurrency exchange Mt. Gox, which is set to start in early July, could temporarily depress the market. According to the analysts, creditors who will receive approximately 142,000 Bitcoins (worth nearly $9 billion at current prices) may choose to liquidate a portion, leading to an initial market glut.
Market Reactions and Historical Comparisons
A similar scenario played out recently with Gemini Earn, where users who utilized Gemini’s Earn product were reimbursed with a total of $2.18 billion in cryptocurrency. Most of these returns, 97% to be specific, were made by May 29, with the remaining 3% delivered by June 20. JPMorgan highlighted that it is reasonable to assume that many of these creditors undertook some degree of profit-taking, thereby impacting market dynamics.
New Waves of Pressure Expected in July
JPMorgan’s analysts assert that if a significant portion of Mt. Gox creditors decide to sell their newly returned Bitcoins in July, it could exert downward pressure on cryptocurrency prices. However, they also expect this impact to be temporary, projecting a market rebound starting from August.
Comparison with FTX Creditor Reimbursements
The situation is further complicated by additional impending payouts from other bankrupt crypto exchanges such as FTX. Unlike Mt. Gox and Gemini Earn, FTX plans to reimburse its creditors in cash rather than cryptocurrencies. JPMorgan believes that while in-kind payments may lead to liquidation risk if creditors choose to sell for cash, cash settlements could foster a positive inflow if knowledgeable creditors decide to reinvest in crypto assets.
Analysts noted a crucial challenge for the market arises from the gap between the Bitcoin sales by Mt. Gox in July and FTX’s scheduled payments in October or November, which might create a volatile trading environment during this period.
Conclusion
In summary, while JPMorgan has projected a temporary bearish trend due to the significant Bitcoin release by Mt. Gox in July, they expect this to be a short-lived phenomenon. The market is anticipated to stabilize and begin recovering from August onwards. The interplay between upcoming creditor payouts by Mt. Gox and FTX will be crucial in determining the overall market trajectory in the ensuing months. Investors should brace for potential volatility but remain optimistic about long-term recovery prospects.
