Mt. Gox Bitcoin Distribution Causes Market Panic: Is This a Buy the Dip Situation?

1. Digital Asset Market: The trustees of the defunct Mt. Gox crypto exchange announced that they will start distributing the stolen bitcoins to clients in the first week of July. However, traders believe that the impact on the market may not be as severe as initially feared, as most creditors are likely to hold onto their bitcoin due to their low acquisition cost. They also believe that funds that acquired claims from creditors will not immediately sell the received bitcoins, further easing concerns about potential selling pressure. The amount of Bitcoin to be distributed is still unknown, but the exchange consolidated 140,000 BTC from multiple cold wallets in May. The news initially caused a significant drop in bitcoin's price bringing it to below $60,000 at one point. The price has stabilized this morning.
   

2. Macro Economics: The European Union is again flexing its antitrust muscles with US tech giants as the European Commission (EC) charged Microsoft and Apple with violating EU competition laws. The charges against Microsoft include illegally bundling its Teams software with other proprietary business software. In contrast, Apple was charged with violating the Digital Markets Act by blocking developers from informing customers about accessing content outside of the App Store. The EU has a history of taking more aggressive approaches in regulating businesses compared to the US and has recently adopted laws to police personal data, social media content, and the dominance of Big Tech. These latest antitrust actions show the EU's continued efforts to curb the power of tech giants and protect consumers.
   

3. Equities: Stocks in the US traded mixed on Tuesday, with the Nasdaq and S&P 500 edging higher while the Dow Jones dropped. The rebound was led by a 5% rise in Nvidia's stock, which had suffered a three-day slide. Other sectors that saw gains included tech and communication, while real estate lagged behind. 
   
   This year's stock market rally has been driven by a handful of large tech stocks, which some may see as concerning. However, strategists believe this is not a flaw but rather a feature of the artificial intelligence theme. These tech stocks, such as Nvidia and Apple, have contributed significantly to the S&P 500's overall gains. While there may be some concern about the market's reliance on these few stocks, research shows that this may not be a problem. Upgrades to year-end S&P 500 targets reflect optimism in the market, with analysts citing the strong performance of these large tech companies. This trend may continue, with a potential for even more gains driven by revenue beats from these few stocks. Ultimately, this concentration of stocks driving the market rally may not be bad for investors, as it has allowed for overall gains in the index.

4. The Fed and US Treasury: Treasury Secretary Janet Yellen does not see a basis for a recession in the US and expects the inflation rate to reach the Federal Reserve's 2% target next year. She attributes the current high inflation to shelter costs, which she believes will come down over the next year. Yellen also announced measures to address the housing affordability issue and expressed concern about the previous administration's tax cuts and their impact on the deficit. She believes President Biden's budget proposal will help to reduce the deficit and maintain a sustainable fiscal course.
   
   In other news, the Treasury sold $69BN in 2Y paper in a solid auction, with the high yield of 4.706% being "on the screws". The bid to cover was higher than the previous month, above the six-auction average, and the highest since last July. Foreign demand increased from the previous month's auction, while dealers were left with a lower share. Overall, the auction had no impact on secondary pricing levels.

5. Geopolitical: The European Union has officially begun the membership talks for Ukraine and Moldova, signaling a significant distancing from Russia. Despite some roadblocks, the process is expected to take years and is not guaranteed. Ukraine's corruption is causing some concern, while Hungary has already started to block Kyiv's aspirations. The accession criteria, which includes 35 policy areas, must be met by all 27 EU member countries for a candidate country to join. Given the example of Turkey's frozen talks, it could take decades for Ukraine to join the EU, especially with the ongoing war.

How can we help?

​​Contact Curtis Crispin, Director of Institutional Sales, for on/off ramp, global FX, and Bitcoin backed lending services (Schedule Time with Curtis or Telegram).

View from our desk

The panic triggered by the Mt. Gox Trustee's announcement of the impending distribution of stolen Bitcoins drove the market below $60,000 but has since stabilized. We consider this panic overblown and do not foresee a scenario where a significant portion of this distribution would lead to immediate liquidation. Most of this Bitcoin was acquired for under $1,000, so new owners have little reason to rush to market. The market held strong, providing significant support at the $60K level. We believe this buying opportunity will not last long and see the distribution further supporting a growing over-collateralized lending market.

In other news, Treasury Secretary Janet Yellen has stated there is no chance of a recession and anticipates a return to the 2% inflation target early next year, a view we disagree with. The market remains at all-time highs, led by tech giants. It was revealed through a recent recall that Tesla has sold just over 11,000 Cybertrucks, far short of Elon Musk's 250,000 target. Given this shortfall, we are steering clear of EV investments for the remainder of the year. On the Federal Reserve's rate hike side, we maintain our view of no more than one cut this year, possibly none.

The current market dynamics reflect a period of strategic repositioning. The stabilization after the Mt. Gox announcement and the strong market support at $60K suggest a resilient Bitcoin market. Meanwhile, broader economic signals, including Yellen's optimism and the tech-driven market highs, contrast with uncertainties in the EV sector and inflation outlook. Investors should stay informed and ready to act on opportunities, balancing cautious optimism with strategic portfolio adjustments.

Happy Trading!

The 1Konto Team

About 1Konto
1Konto is a leading institutional on/off ramp for digital assets and FX markets, dedicated to servicing banks, broker-dealers, asset managers, and corporate FX platforms. We provide streamlined access to global markets, ensuring seamless transactions and optimal liquidity management for our clients.

​Our 1KPrime Lending services offer innovative Bitcoin-backed loans with secured custody tailored to enhance capital efficiency and strategic flexibility for institutions.

Reach out today for a consultation on our tailored solutions for best price liquidity and services in digital and FX.

Not Financial Advice Disclaimer

The content of our substack market briefs is for informational purposes only and should not be construed as financial advice. Any investment decisions made based on the information provided are solely at your own risk. We do not endorse or guarantee the accuracy or reliability of the information shared. It is recommended to consult with a professional financial advisor before making any investment decisions.