Mt. Gox Effect? Bitcoin Dominance Drops the Most in 5 Months

BTC's dominance tanked Monday as news of Mt. Gox repayments bolstered concerns of supply overhang entering the market.

Bitcoin (BTC) relative strength took a hit Monday as news of impending Mt. Gox repayments stoked concerns over an avalanche of selling pressure entering the market.

BTC's dominance fell sharply Monday as news of Mt. Gox repayments stoked concerns. BTC’s relative strength took a hit Monday as news of impending Mt. Gox repayments stoked concerns over an avalanche of selling pressure entering the market.

BTC's dominance fell 1.8% to 54.34%, notching its biggest single-day percentage decline since Jan. 12, as investors pulled money from bitcoin at a faster pace than from smaller tokens, TradingView chartsshow.

BTC's price fell nearly 5% to hit lows below $59,000 at one point during the sell-off, CoinDesk data indicates.

The sell-off appeared to be driven by news that the defunct crypto exchange is set to distribute 140,000 BTC to victims of the 2014 hack in July. Some recipients may choose to sell their crypto holdings once they receive their payouts, creating a supply overhang in the market.

That adds to selling pressure that has been building since June 7, with faster selling by miners and outflows from spot exchange-traded funds (ETFs).

The sell-off concerns were also seen in strong demand for short-term BTC put options on the Deribit exchange, Amberdata data show. Put options offer protection against price slides in the underlying asset.

The seven-day and one-month call-put skews, which indicate what traders are willing to pay to acquire an asymmetric payout in the upward or downward direction over one week and one month, turned negative. This signals renewed demand for puts.

However, some observers say the actual selling pressure from the Mt. Gox reimbursements may be more limited.

"The exact amount of Mt. Gox funds to be distributed in July are not specified, but it is part of a larger reimbursement plan that includes 142,000 Bitcoin and 143,000 Bitcoin Cash, as well as fiat currency totaling 69bn Japanese yen ($432mn)," Tagus Capital said in a market note.

"However, Mt. Gox creditors may hold their Bitcoin rather than sell, as they are long-term investors who resisted previous offers for USD payouts and may face capital gains tax on sales," Tagus Capital added.

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team. He joined CoinDesk in 2021 after working as an editor covering technology and startups at Protocol. Prior to Protocol, Omkar was a senior reporter at TechCrunch covering venture capital, startups and mergers and acquisitions. He began his journalism career in 2014 at the International Business Times covering private equity, venture capital, technology and renewable energy. Follow him on Twitter at @omkar_g.

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