- Heavy Grayscale sales of Bitcoin erased the December gains, with the top crypto now fighting to hold on to support at $40,000.
- Hopes that a spot Ether ETF approval would reignite bull market energy faded after the SEC postponed a decision on BlackRock’s application until March.
- News that the Mt. Gox Bitcoin repayments could soon begin put further pressure on its price as many worried about another potential large-scale sell-off.
The cryptocurrency market suffered another leg down over the past week as large Bitcoin (BTC) liquidations by Grayscale amid profit-taking and fund switching weighed heavily on BTC price and erased the gains witnessed in December during the lead-up to the ETF launches.
While many in the more traditional financial circles used the 20% pullback in Bitcoin as evidence that the gains seen in the second half of 2023 were all ETF-driven hype, experienced crypto traders know major pullbacks are par for the course during bull market rallies. Some have noted that it’s actually standard to see 30% pullbacks at this stage – during pre-halving volatility – which means a retest of support around $34,000 is not out of the question.
Hopes that the rapid approval of a spot Ethereum (ETH) ETF would reignite bull market energy fizzled out as the SEC pushed a decision on the application submitted by BlackRock until March. Numerous representatives from the regulator have said that the approval of an Ether ETF is not guaranteed just because a spot BTC ETF was approved, as the ruling in the Grayscale vs. SEC case had a significant impact.
After holding steady above $41,600 over the weekend, Bitcoin’s price plunged lower on Monday and extended the losses on Tuesday, bottoming out at $38,500. Bulls reversed course on Wednesday, bidding BTC back to support at $40,000, and managed to hold the line through trading on Thursday, leading to a daily close at $39,920.
At the time of writing, the total cryptocurrency market cap stands at $1.55 trillion, a decrease of 4.9% over the past week. The DeFi market cap currently stands at $78.3 billion with a 24-hour trading volume of $3.73 billion, which is 8.12% of the total crypto market volume.
Bad Trading Day – Crypto mining firm Core Scientific had a rough relisting process as its stock declined by more than 30% on its first day of trading following a 13-month restructuring process that helped strengthen the balance sheet of the company after clearing out $400 million in debt. The shares were relisted on the Nasdaq on Wednesday, spiking to a high of $5.92 initially before plunging to $3.42 as the day progressed. Core's restructuring plan, which was crafted to help the company recover from a brutal crypto winter, resulted in converting debt owed to equipment lenders and convertible note holders into equity in the company. The company is also considering turning its remaining debt into equity and using cash as part of the bankruptcy plan. Core is looking to get its finances in order ahead of this year’s Bitcoin halving, which is forecast to cause a rise in both production and cash costs for Bitcoin miners.
Distribution Incoming – The infamous Mt. Gox crypto exchange looks poised to start distributing Bitcoin to creditors as reports emerged this week that the firm was sending emails to those who are owed funds seeking to confirm their identity, the existence of their accounts, and their repayment addresses. The emails requested that creditors complete identity verification for crypto exchange accounts that are set to be used to repay Bitcoin and Bitcoin Cash. “Please note that you may not be able to receive repayment in BTC/BCH if your account is disabled or frozen in the future,” a rough translation of the email stated. The exchange is expected to repay its creditors 142,000 Bitcoin and 143,000 in the forked cryptocurrency, Bitcoin Cash, in addition to 69 billion Japanese yen ($510 million) by October 2024.
Shifting Funds – Grayscale’s recently converted GBTC ETF has experienced outflows of more than 100,000 BTC since the spot ETFs launched on Jan. 11 and holds 537,000 as of Wednesday morning. Data compiled by Arkham shows that Grayscale has moved a total of 113,000 BTC from its wallet, mainly to Coinbase Prime, in preparation for sale. "The outflows are usually split between Coinbase Prime and new GBTC custody addresses," said Arkham. "This means that not all of the BTC moved is being redeemed. The outflows appear to be settlements of trading activity for the previous day(s)." Bankrupt crypto exchange FTX has emerged as a major source of GTBC sales as the FTX estate dumped 22 million shares worth close to $1 billion in recent days, taking the firm’s GBTC ownership down to zero.
And in the World of Governments and Cryptocurrencies…
Unconstitutional – The Federal Court of Canada ruled that Prime Minister Justin Trudeau’s government infringed on the country’s charter of rights and freedoms when he invoked the Emergencies Act to freeze funds, including cryptocurrencies, that were donated to truckers protesting COVID-19 restrictions. “There was no national emergency justifying the invocation of the Emergencies Act and the decision to do so was therefore unreasonable,” the decision from Justice Richard Mosley said. Along with more than $19 million raised through GoFundMe and GiveSendGo, which the government blocked, the trucking convoy raised 22 BTC valued at nearly $1 million through the Tallycoin BTC fundraising platform. Finance Minister Chrystia Freeland said the government will appeal the ruling.
Failed Investigation – Cryptocurrency lending platform Nexo has filed a claim against the Republic of Bulgaria with the World Bank’s International Centre for Settlement of Investment Disputes (ICSID), looking to recoup $3 billion in damages from the Bulgarian government following failed criminal investigations into the platform. Bulgarian prosecutors previously alleged that Nexo executives participated in an organized criminal group from 2018 to 2023 aimed at profiting from crypto lending, but dropped their case in Dec. 2023 after concluding that there was no evidence of crimes committed by the four Bulgarian nationals and Nexo co-founders. A statement from co-founder Antoni Trenchev said that despite the business being able to continue its operations, Nexo had suffered as a result of the dropped investigation, and is looking to recoup some of its losses.
SIM Swap – The US SEC confirmed it fell victim to a “SIM swap” attack, which led to the false X post on Jan. 9 stating that multiple spot Bitcoin ETFs had been approved. “The SEC determined that the unauthorized party obtained control of the SEC cell phone number associated with the account in an apparent ‘SIM swap’ attack,” the SEC said. “Once in control of the phone number, the unauthorized party reset the password for the @SECGov account.” The regulator noted that multi-factor authentication (MFA) had previously been enabled on the @SECGov X account, but was disabled by X support at the request of SEC staff in July 2023 due to issues accessing the account. The SEC said law enforcement is now investigating how the unauthorized party got the carrier to change the SIM for the account and how the party knew which phone number was associated with the SEC’s X account.