1 Introduction: Overview of key events in the recent cryptocurrency market
The cryptocurrency market has experienced two major events recently: the approval of the Ethereum ETF and the latest progress of the Mt. Gox creditor compensation. These two events have had a significant impact on the market, but their effects are completely different. Unlike the price surge after the approval of the Bitcoin ETF, the launch of the Ethereum ETF did not drive its price up as expected by the market. Instead, there was a phenomenon of capital outflow, and even had a negative impact on the price of Bitcoin. At the same time, the nearly ten-year-long Mt. Gox compensation case has finally made substantial progress, injecting new uncertainty into the market. This article will deeply analyze the reasons behind these events, explore their short-term and long-term impacts on the cryptocurrency market, and how investors should respond to these market changes.
2 Analysis of Ethereum ETF Fund Flow
2.1 Grayscale ETF Outflows
Since the Ethereum ETF was officially traded on July 26, 2024, Grayscale, as the ETF institution with the largest holdings, has shown a significant outflow trend. According to Coingalss data, a net outflow of 140,800 ETH was recorded on the first trading day, followed by outflows of 93,900, 103,800, 112,300, 64,300 and 36,300 ETH in the following five trading days. Although the average daily net outflow has shown a gradual decrease, the cumulative outflow is still considerable. As of the sixth trading day, Grayscale had a total outflow of 551,300 ETH, while the overall market net outflow was 159,800, indicating that other ETFs are absorbing Grayscale's outflows. It is worth noting that Grayscale's mini trust ETH, although maintaining a net inflow, is relatively small in scale, ranking only fourth in net inflows within 6 days. This continued outflow of funds suggests that some investors may be turning from Grayscale to other newly approved ETF products in search of lower fees or better liquidity. However, the slowdown in outflows could indicate that the market is gradually reaching a new equilibrium.
Ethereum ETF inflows and outflows
2.2 Comparison of fund flows among various ETF institutions
Among the approved Ethereum ETFs, only Grayscale showed a net outflow, while other institutions maintained a net inflow. The main Ethereum ETFs include ETHE, ETH, ETHA, ETHW, FETH, ETHV, EZET, CETH and QETH. According to the net inflow ranking, BlackRock's ETHA ranked first, followed by Bitwise's ETHW and Fidelity's FETH. Grayscale's small position ETH ranked fourth, followed by ETHV, EZET, CETH and QETH. This differentiated flow of funds reflects investors' preferences for different ETF products, and may also imply that the competition landscape among institutions is re-emerging, and of course it also exposes the competitive pressure that Grayscale may face.
Comparison of ETF Institutional Fees
2.3 Comparison with Bitcoin ETF Data
According to coinank data, the Bitcoin spot ETF achieved a net inflow of $1.261 billion in 12 trading days (July 17-30), and Grayscale currently holds 285,500 bitcoins. In contrast, the Ethereum spot ETF experienced a net outflow of $524 million in 6 trading days (July 23-30), and Grayscale still holds 2.931 million Ethereum.
Looking back at the situation after the Bitcoin ETF was approved, when Grayscale's Bitcoin holdings dropped from 619,400 to 446,500 (about 27%), the market reached a balance point, and the price rose sharply (can only be used as a reference). Currently, the Ethereum ETF has not reached a similar balance point. Grayscale's Ethereum holdings have dropped from 2.9298 million to 551,300. At this rate, it may take another 1-2 weeks to reach a 27% decline. From this point of view, the Ethereum ETF market may take longer to digest the initial selling pressure. Investors should pay close attention to the changes in Grayscale's holdings, because reaching a balance point may become a key trigger for the rebound in Ethereum prices.
Grayscale ETF Bitcoin holdings and price comparison chart
Grayscale ETF Ethereum holdings and price comparison chart
3 Progress of the Mentougou Incident
3.1 Background and latest developments
Mt. Gox (Mentougou for short), an exchange founded in 2010, once handled more than 80% of global Bitcoin transactions in 2013 and became an industry giant. However, in February 2014, Mt. Gox suddenly fell into crisis, shut down its website and claimed that it had lost about 850,000 Bitcoins, worth about $473 million. This incident shocked the entire cryptocurrency community. On the 28th of the same month, Mt. Gox officially filed for bankruptcy protection. Its financial report showed that it had a debt of 6.5 billion yen and only 3.8 billion yen in assets, exposing the company's serious financial problems. Subsequently, the person in charge, Mark Karpeles, was arrested by the Tokyo police, but was later released on bail. During the investigation of the incident, the company accidentally found 200,000 Bitcoins in an old wallet, which slightly alleviated the loss. After years of legal procedures and creditor rights protection, a liquidation compensation plan was finally formulated, planning to repay creditors about 142,000 BTC and 143,000 BCH, with a total value of about $8.77 billion. This incident not only caused huge economic losses, but also became an important turning point in promoting industry self-discipline and improvement.
Latest developments:
Exchanges such as Kraken and Bitstamp have begun returning funds to Mt. Gox creditors.
Some creditors have received the returned Bitcoin in their Kraken accounts.
The assets Bitstamp distributed to creditors are now fully accessible.
3.2 Mentougou Holdings Data Analysis
According to Akam data, on July 31, 2024, 33,963.8 BTC (about $2.248 billion) were transferred out of the Mt. Gox address. Since July 5, a total of 95,522.7 BTC (about $6.143 billion) have been transferred out, of which 61,558.9 BTC (about $3.894 billion) have been distributed through Bitbank, SBI VC Trade, Kraken and Bitstamp. As of July 31, the balance of the Mt. Gox account was about 46,000 bitcoins, worth about $2.99 billion.
Mentougou account transfer records
Looking at the historical changes in the Mt. Gox account balance, we can clearly see a long-term stable horizontal trend line. However, recently this horizontal line has finally shown a significant downward trend. This change is not just a fluctuation in data, but also symbolizes the end of an era. For many years, the Mt. Gox incident has been an indelible haze in the cryptocurrency market and has become a focus of repeated discussions among investors and analysts. Now, as the line representing the account balance begins to tilt downward, we see a clear signal that this long-standing unresolved issue will soon come to an end in 2024. This turning point not only marks the end of Mt. Gox, but may also indicate that the market will get rid of the influence of this long-term negative factor.
Mentougou account balance
3.3 The comprehensive impact of the Mentougou incident on market sentiment
Mark Karpelès, former CEO of Mt. Gox, stated, "While it is impossible to quantify, we believe the creditor base is primarily composed of die-hard Bitcoin holders. Thousands of creditors have waited 10 years for payment and have rejected compelling and aggressive claims offers during this time, suggesting they want their coins back." This statement provides important clues for us to understand the motivations of creditors' behavior.
Based on Karpelès’s point, we can further analyze the potential impact of the Mt. Gox payout on the market:
1) Considering that Mt. Gox paid out cryptocurrencies instead of fiat currencies, and that creditors had to wait for a long time, we can speculate that this group of early Bitcoin participants may have strong market conviction and a willingness to hold for the long term. They may be more inclined to continue holding rather than cashing out immediately after receiving compensation in the current relatively strong market environment.
2) Implicit increase in holding costs: It is worth noting that a considerable number of creditors choose to transfer their claims to professional bankruptcy liquidation companies or institutional investors, which may reduce the possibility of large-scale sell-offs by these institutions in the short term.
3) Decentralized market pressure: Although some degree of selling pressure is inevitable, based on the above factors, we can reasonably expect that the possibility of large-scale concentrated selling is low. The selling pressure may be gradually released over several months, giving the market enough time to digest these supplies, so that the overall impact is relatively controllable.
3.4 Short-term market trend forecast
According to the latest data, Grayscale ETHE has lost 510,000 Ethereum (ETH), but still holds a huge position of about 2.9 million ETH. Mt. Gox has transferred most of the Bitcoin back to creditors, and currently only about 50,000 Bitcoins are left to be processed. The combined effect of these two events may put some pressure on the market in the short term. It is possible that the positive sentiment in the market in a short period of time will need to consume this part of the funds until a balance is reached. On August 1, the Federal Reserve announced that it would maintain the target range of the federal funds rate at 5.25% to 5.5%. This is the eighth consecutive meeting of the Federal Reserve since September last year to keep interest rates unchanged. The market may expect the Federal Reserve's monetary policy meeting in September and Chairman Powell's press conference to bring good news.
4 Investor response strategies
Faced with the potential selling pressure from Mt. Gox, the long-term selling pressure from the US government, and the public's preference for mainstream cryptocurrencies (BTC, ETH), investors need to clarify their own positioning. Long-term investors may be less affected by these short-term factors, while short-term investors need to be more vigilant about risks, especially when investing in small-cap tokens. For long-term investors, it may be a good opportunity to gradually build positions; while short-term investors need to be more cautious, pay close attention to market dynamics, and adjust strategies in a timely manner. In any case, diversification and risk management are key to dealing with market uncertainties.
