- Market stagnant in fear of the Mt. Gox Rehabilitation Plan scheduled to be released on July 1
- Mt. Gox Day postponed for another 3.5 months till Oct 15
- Fed’s balance sheet shrank due to maturing of central bank liquidity swaps
- Grayscale suspended subscriptions of its products, leading to a lack of buying interests for mainstream cryptos
Over the weekend, Bitcoin’s price briefly fell below USD 9,000 and has since stalled in the low USD 9,000 range.
There is a rule of thumb that Bitcoin’s price does not rise in the month prior to every scheduled Mt. Gox Rehabilitation Day. The latest Mt. Gox Day is on July 1, 2020, but is rescheduled to Oct 15 today (June 30).
Let’s not forget that the rehabilitation agent of Mt Gox must distribute around 140,000 bitcoins to their creditors. Assuming the original purchase costs of around USD 400 and a 20% recovery rate, creditors’ costs are estimated at USD 2,000. While some of these creditors may choose to hold, others will inevitably sell for a profit of over 300%. The anticipation caused the price to fall before the event unfolds. Now that the release is postpone and price overhang removed, Bitcoin is free to soar.
The Federal Reserve’s balance sheet shrinks for the second consecutive week, and in turn, heightens the cautious market attitude.
However, digging deeper into the Fed’s balance sheet, we find that the change is primarily attributed to the maturing of central bank liquidity swaps, which does not signal a global liquidity crunch. USD swaps by the Fed to foreign central banks are imperative in dire times. If the Fed no longer deems it necessary to renew these swaps, then perhaps, the most critical period is behind us.
On a separate note, following an incredible amount of Grayscale product subscriptions on June 24, including 10,844 BTC in GBTC, 87,993 ETH in ETHE, and 130,199 ETC in ETCG, Grayscale suspended the program on June 25. Cash contributions from the subscriptions alone, although the exact percentage remains unknown, supported the market during its downturn.
The effect of the suspension is immediately reflected in the lack of buying interests for mainstream cryptos. However, Grayscale has full discretion over opening or closing subscription access, with or without proper cause. In the past, GBTC shut down its subscription access from January to October 2017, as it awaited listing on a national exchange but eventually withdrew the application. The program was suspended again from May to June 2019, and was reopened from July 8 to 22, in the third quarter of 2019.