Bitcoin (BTC) slid on Monday after Mt. Gox, the defunct cryptocurrency exchange, announced it is beginning the process of repaying clients whose assets were pilfered in a huge crypto hack nearly a decade ago.
Bitcoin fell tk% on Monday afternoon after the news broke. The payments will start in July and be made in bitcoin and bitcoin cash, according to a statement posted on Mt. Gox's website.
740,000 bitcoins, or an estimated $15 billion worth of bitcoin at today's prices, were stolen from Mt. Gox users in 2014. The repayment process will put selling pressure on bitcoin, not only because of the massive amount of bitcoin re-entering the market but also due to the fact that customers will be receiving their bitcoin at far higher prices than when they bought them. That makes it more likely they will sell, according to an April report from K33 Research.
Bitcoin's price sank to its lowest since mid-May when the news of the repayment process broke this morning, punctuating the selloff that has driven the digital asset down tk% over the past month. Ethereum tanked with its older sibling, falling tk% by the end of the day Monday.
Crypto gained momentum when the Securities and Exchange Commission approved ten novel spot bitcoin exchange traded (ETF) funds in mid-January, a watershed win for the crypto industry.
Firms had been vying to launch this kind of ETF, which is backed by actual bitcoin as opposed to bitcoin futures contracts, for a decade ever since the Winklevoss twins (yes, those guys) first applied for one in 2013.
Another victory came last month when the SEC, in a shocking twist, approved spot ethereum ETFs after analysts and industry watchers assumed they would deny the vehicles. Yet unlike when the spot bitcoin ETFs were approved, ethereum ETFs haven't hit the market yet.
The latest selloff is a reminder that it can be a double-edged sword to trade on momentum. It's important to keep in mind that volatility is the norm, not the outlier, when it comes to investing in crypto, and while the ETFs provide investors with more security for their holdings, they don't cushion the downside risk that comes with big swings in bitcoin's price.
So while you definitely shouldn't buy Jason Derulo's meme coin, even blue chip cryptocurrencies aren't for the faint of heart.
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