Whales to Benefit From Overestimated Mt. Gox FUD: CryptoQuant CEO

Ki Young Ju has downplayed the potential impact of Mt. Gox repayments on Bitcoin (BTC). He believes that the perceived sell-off is exaggerated and will be used by whales to buy BTC at a discount. Despite concerns about $3 billion to $9 billion worth of BTC being sold, Ju believes the market can absorb this, and on-chain data supports this belief. Meanwhile, Craig Wright has officially retracted his claims of being Bitcoin's creator, Satoshi Nakamoto, while European Bitcoin mining firm Northern Data is fighting fraud allegations from former executives.

CryptoQuant CEO Downplays Mt. Gox Repayments Impact

The impact of Mt. Gox's repayments on Bitcoin (BTC) is being overestimated and will likely be used by whales to buy more BTC at a discount, according to CryptoQuant CEO Ki Young Ju. In a post on July 16, Ju stated that the effect of Mt. Gox sales, anywhere between $3 billion and $9 billion in BTC, is minimal compared to the total increase in Bitcoin's market capitalization over the past 18 months. 

Ju pointed out that even if $3 billion worth of Bitcoin from Mt. Gox were sold on Kraken, it would only represent 1% of the realized cap increase during this bull cycle, which is manageable liquidity. He also believes that Bitcoin's price is a lot more susceptible to speculative fear, uncertainty, and doubt (FUD) around perceived negative events rather than the fundamental selling activity.

Ju stated that while many investors are panic selling, smart money is continually buying more Bitcoin. He referred to data showing that large individual custodial wallets with no outflows, referred to as ”permanent holders,” accumulated 85,000 BTC over the past 30 days. 

Over the last several weeks, the Mt. Gox trustee moved funds from cold wallets to hot wallets multiple times. Mt. Gox currently holds 138,985 BTC valued at approximately $8.93 billion, according to Arkham Intelligence data. On July 5, Mt. Gox informed creditors that it started returning around 140,000 recovered Bitcoin to its users who lost their funds during the 2014 collapse. 

However, Galaxy Digital's head of research, Alex Thorn, estimated that only 65,000 of the total 141,000 Bitcoin might actually hit the market, which will reduce the expected downside. Other analysts also suggested that a lot of the potential sell pressure from Mt. Gox sales was already priced in and that the worst of Bitcoin's price action was likely over.

In the past seven days, Bitcoin's price has increased by 12%, rebounding from two-month lows of $53,500 on July 4, and is currently trading at $65,792, according to CoinMarketCap data.

Bitcoin Selling Pressure Exhausted

On-chain analytics firm Glassnode agrees that things are looking up for Bitcoin now that it is once again trading above $65,000. Data from TradingView shows Bitcoin rallied by over 20% from a low of $56,616 on July 12 to an intraday high of $65,210 on July 16, likely due to the exhaustion of the German government’s sell-side pressure. 

Historically, large entities like miners and institutions have been primary sources of sell-side pressure. The recent dip to $53,000 was largely due to the expected repayments by Mt. Gox and Bitcoin sales by the German government.

Bitcoin: Large Entities Balances (Source: Glassnode)

Glassnode reported that the German government’s 48.8k BTC balance was depleted over a few weeks, with most of the selling happening between July 7 and July 10 when over 39.8K BTC flowed out of labeled wallets. This selling happened after Bitcoin dropped to around $54,000, which suggests that the market already priced in the sell-off. 

A sustained period of inflows across all ETFs has also contributed to the relief in Bitcoin markets. In fact, ETFs have seen a lot of interest since early June, with over $1 billion in inflows last week.

CoinShares data corroborates this, and revealed that Bitcoin investment products saw the fifth-largest weekly inflows on record, with $1.347 billion between July 8 and July 12. Farside Investors data also pointed out that spot Bitcoin ETFs have seen seven consecutive net inflows, with more than $300 million into 11 US ETFs on July 15 alone. 

Strong institutional demand over the last week seems to have counteracted the supply from the German government, which led to a rebound in Bitcoin’s price. Additionally, the decline in exchange flows, an important gauge for investor interest and market liquidity, indicates decreasing selling pressure. Exchange flows have declined a lot since the all-time high set in March, stabilizing at about $1.5 billion a day, which also suggests reduced sell-side pressure.

Craig Wright's Satoshi Claims Officially Debunked

Meanwhile, Craig Wright issued a legal disclaimer on his website on July 16 stating that he is not the pseudonymous creator of Bitcoin, Satoshi Nakamoto. The disclaimer referenced a recent ruling from the United Kingdom High Court of Justice and directed visitors to a summary of the findings by the Crypto Open Patent Alliance (COPA). The disclaimer admitted that Wright was not the author of the Bitcoin white paper and does not hold a copyright to the technology described in it.

The legal disclaimed on Craig Wright’s website (Source: Craig Wright)

In 2023, Wright sued several Bitcoin developers after he alleged they violated his copyrights on some of the underlying technology for the distributed ledger system and claimed rights to the Bitcoin database. Wright had been claiming that he was Satoshi Nakamoto since 2016. 

The legal battle intensified in 2024 when COPA presented more than 50 pieces of evidence disproving Wright’s claims. Forensic experts and on-chain analysts also testified that Wright produced forgeries and tampered metadata. Judge James Mellor concluded that the errors in Wright's forgeries and metadata showed that he was not Satoshi.

Wright's assets were recently frozen by the UK High Court to help podcaster Peter McCormack recover $2 million in legal fees from a defamation lawsuit filed by Wright in 2019. Additionally, Judge Mellor recommended that Wright be investigated by the Crown Prosecution Service for perjury. This means that Wright's legal troubles may not be over just yet.

Bitcoin Mining Firm Denies Fraud Allegations

In other BItcoin news, European Bitcoin mining firm Northern Data is pushing back against a whistleblower suit filed by former executives Gulsen Kama and Joshua Porter. They claim they were wrongfully terminated after raising concerns about the company's financial health and alleged tax evasion. 

On Monday, Northern Data's lawyers filed a motion to dismiss the federal case, and called it a “textbook example of bad faith litigation.” They alleged that Kama and Porter had brief and unproductive tenures. According to the lawyers, Kama was fired for cause and Porter was laid off for lack of productivity. The motion claimed that when Kama and Porter made extortionate demands for severance payments, Northern Data rejected them, which likely ended up prompting the plaintiffs to pose as whistleblowers.

The filing also pointed out that Kama previously filed whistleblower suits against former employers, including tax preparer Jackson Hewitt in 2019 and Quest Diagnostics last year, alleging wrongful termination and workplace discrimination, respectively. 

Northern Data's motion also argued that the California court lacks jurisdiction over the corporate defendants, which are incorporated in Delaware and have principal places of business in Virginia. Additionally, the motion described the fraud claims as inflammatory and unsupported. A hearing to discuss the motion to dismiss is scheduled for Aug. 19, 2024, in Los Angeles. 

Kama and Porter's complaint alleges that Northern Data lied to investors about its financial strength while it was borderline insolvent and committing tax evasion potentially worth tens of millions of dollars. These allegations came amid speculation that the Tether-backed firm is considering a U.S. IPO of its AI unit, reportedly valued at up to $16 billion.