• Concerns about a possible Bitcoin payout from Mt. Gox caused a market loss of more than $170 billion.

• Adding to the market pressure, the German government sold about 3,000 bitcoins.

• Bitcoin and Ethereum have bright long-term prospects, with past market cycles suggesting the possibility of new all-time highs and the anticipated rebound following Mt. Gox repayments.

Over $170 billion wiped off cryptocurrencies as the market tanks on Mt. Gox bitcoin payout fears. On Friday, the trustee for the Mt. Gox bankruptcy estate announced it had begun making repayments in bitcoin and bitcoin cash to some creditors.

This has led to a significant crypto market crash, causing a considerable drop in bitcoin prices and affecting other major cryptocurrencies like Ethereum.

Crypto Market Crash and Its Impact on Bitcoin, Ethereum, and Beyond

Bitcoin’s price fell under $55,000 for the first time since February. At one point, the entire cryptocurrency market shed more than $170 billion in combined market capitalization within 24 hours, according to CoinGecko data.

On Friday, the trustee for the Mt. Gox bankruptcy estate, Nobuaki Kobayashi, said in a statement that repayments in bitcoin and bitcoin cash had begun through several designated crypto exchanges.

Ethereum Price Drop and its Effects

Meanwhile, the rival token, Ethereum (ether), sank around 5% to $2,971.68. This drop in the price of Ethereum contributed to the overall decline in the cryptocurrency market.

The Mt. Gox trustee did not specify how much money had been transferred to these exchanges but noted that the remaining funds would be returned to creditors once certain conditions were met.

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The Role of Mt. Gox Bankruptcy in the Crypto Market Crash

The Mt. Gox bankruptcy estate is central to this current crypto market crash. Recently, the world’s largest cryptocurrency has been pressured by news of the collapsed bitcoin exchange Mt. Gox, preparing to distribute around $9 billion worth of coins to users.

This dumping of coins onto the market is expected to lead to significant selling action, contributing to the bitcoin price drop and affecting overall crypto market stability.

The trustee is still working to ensure repayments “can be made safely and securely,” urging “eligible rehabilitation creditors to wait for a while.”

It comes after a small amount of bitcoin was moved out of wallets associated with Mt. Gox, according to blockchain analytics firm Arkham Intelligence, with the most significant movement being a $24 transfer to the Japanese crypto exchange Bitbank. Bitbank is among the recipients listed to support repayments.

The Ripple Effect on the Crypto Market

The slump in crypto prices led to hefty liquidations in the derivatives markets. According to crypto data firm Coinglass, 229,755 traders had their positions worth $639.58 million liquidated in the past 24 hours.

Of this sum, $540.46 million represented long trades — financial positions taken when an investor expects the price of an asset to appreciate over the long term. This significant liquidation event has exacerbated the crypto market crash.

Also pressuring crypto markets, the German government on Thursday sold roughly 3,000 bitcoins — worth approximately $175 million as of today’s prices — from a 50,000-bitcoin pile seized in connection with the movie piracy operation Movie2k, according to Arkham Intelligence.

Arkham, which is tracking Germany’s bitcoin wallet, noted the government still holds more than 40,000 bitcoins worth over $2 billion.

Future Prospects for Bitcoin and Ethereum

Industry insiders still expect bitcoin prices to climb again toward the end of the year once the expected near-term selling pressure from the Mt. Gox repayments lifts. Analysts at crypto data and research firm CCData said in a report Tuesday that bitcoin had yet to reach the top of its current appreciation cycle and is likely to hit a fresh all-time high.

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Historical market “cycles” have shown that bitcoin’s so-called halving event — which cuts the supply of new bitcoins to the market — has always preceded a period of price expansion that can last between 12 and 18 months “before producing a cycle top” CCData said in its report.

The last bitcoin halving occurred on April 19 this year, so those historical time frames have yet to pass. “Moreover, we have observed a decline in trading activity on centralized exchanges for nearly two months following the halving event in previous cycles, which seems to have mirrored this cycle. This suggests that the current cycle could expand into 2025,” CCData said.

Tom Lee, co-founder and head of research at Fundstrat Global Advisors, told CNBC’s “Squawk Box“ on Monday that he still sees Bitcoin hitting $150,000 despite the “overhang“ from Mt. Gox’s upcoming disbursement of tokens to creditors. “If I were invested in crypto, knowing that one of the biggest overhangs will disappear in July, I’d think it’s a reason to expect a pretty sharp rebound in the second half,“ Lee said.

Investors are still awaiting the launch of an ether exchange-traded fund (ETF) in the U.S., which would follow the approval of the first U.S. spot bitcoin ETF in January.

In May, the U.S. Securities and Exchange Commission approved a rule change to pave the way for ETFs that buy and hold ether. VanEck, BlackRock, Bitwise, and Galaxy Digital are among the companies looking to launch their ether ETFs.

Conclusion

The recent crypto market crash highlights cryptocurrencies’ volatility and inherent risks. The Bitcoin price drop, coupled with the Ethereum price drop, has significantly impacted the market.

The ongoing effects of the Mt. Gox bankruptcy and subsequent crypto liquidation continue to pressure the market. However, industry experts remain optimistic about the long-term prospects of both Bitcoin and Ethereum.

Investors and cryptocurrency enthusiasts should stay informed and cautious as the market navigates these turbulent times.

By understanding the factors that contribute to market fluctuations and staying updated on industry developments, you can make more informed decisions about your cryptocurrency investments.