Crypto prices crash amid wider global market rout as Mt Gox distributions continue and stablecoin sector grows
DATA from CryptoCompare shows the price of Bitcoin plunged more than 26% over the past week to now trade just above the $51,000 mark amid an aggressive sell-off related to the wider global financial system and saw equities markets lose trillions in days.
Ethereum’s Ether, the second-largest cryptocurrency by market capitalisation, lost more than 32% of its value over the same period and is now trading at $2,270, down from over $3,300 last week.
Cryptocurrency prices saw their steepest decline since the collapse of FTX as a wave of risk aversion affected global financial markets shortly after the Bank of Japan raised interest rates, leading to a strong yen and hitting what’s known as the yen carry trade.
The yen carry trade sees investors borrow yen at low interest rates to purchase other currencies paying a higher interest rate on its bonds to earn a profit, as they receive high interest rates and pay back loans on their yen for next to nothing.
The Bank of Japan’s move saw the yen strengthen against other currencies at a time in which economic growth concerns are growing, as are concerns surrounding the potential overvaluation of artificial intelligence. On top of that, rising tensions in the Middle East threaten to start a regional war.
The crash comes as economic data in the United States has started pointing to a potential recession after worst-than-unexpected unemployment data triggered what’s known as the Sahm rule, an indicator that measures the three-month moving average of the U.S. unemployment rate against its previous 12-month low.
The sell-off in cryptocurrency market comes just a week after former U.S. President Donald Trump vowed to make the United States the ‘Bitcoin superpower’ of the world and to create a “Bitcoin and crypto presidential advisory council.”
Shortly after Trump’s words, the U.S. government moved $2 billion worth of Bitcoin seized from the collapsed darknet marketplace Silk Road. Over the week, it was also revealed that Senator Cynthia Lummis, R-Wy., introduced legislation to create official U.S. Federal Reserve of 1 million Bitcoin over the next five years. The bill also allows states to hold Bitcoin.
41.5% of Mt Gox Bitcoin has been distributed to creditors
Over the week it was also revealed that over 40% of the Bitcoin owed to the creditors of the collapsed cryptocurrency exchange Mt. Gox has now been distributed but didn’t lead to a widespread market sell-off that many had predicted.
While the distribution was occurring Bitcoin was in fact well above the $60,000, even as more than 59,000 BTC worth over $4 billion – out of a total of 141,696 BTC being distributed – went back into the hands of former customers of the exchange, who have waited a decade for their repayments.
Approximately 127,000 Mt Gox creditors have been waiting for over a decade to receive their funds after the exchange collapsed and while the redistribution was expected to lead to massive sell-offs, data analysis firm Glassnode has revealed most appear to still see BTC as a long-term investment.
Meanwhile, Russia’s lower house of parliament, known as the State Duma, approved legislation to legalize cryptocurrency mining and establish a framework for digital assets trading. Miners will have to register with the Ministry of Digital Development, or they won’t be allowed to operate beyond specific energy consumption limits.
Total stablecoin market cap sees tenth consecutive month of increase
Over the week, CCData’s latest Stablecoins & CBDCs report was released, revealing that the total market capitalisation of the stablecoin sector rose 2.11% to $164 billion, marking its tenth consecutive increase in end-of-month market capitalisation, and the highest market capitalization since April 2022.
Stablecoin trading volumes on centralized exchanges, per the report, fell 8.35% to $795 billion as of July 25, marking the fourth consecutive monthly decline. Notably Tether, the company behind leading stablecoin USDT, has reported a record profit of $5.2 billion in the first half of the year, with $1.3 billion of net operating profits being generated in the second quarter.
The company issued around $8.3 billion in USDT during the second quarter of the year, and disclosed Bitcoin holdings of around 80,000 BTC. Earlier, the company committed to using 15% of its realized net operating profits to invest in Bitcoin.
The growing profit came as it remained the dominant stablecoin with a 73.5% market share, according to CCData’s report.
Francisco Memoria is a content creator at CryptoCompare who’s in love with technology and focuses on helping people see the value digital currencies have. His work has been published in numerous reputable industry publications. Francisco holds various cryptocurrencies.
