Early in the morning in the U.S., Mark Karpeles, former head of Mt.Gox the now bankrupt bitcoin exchange, started posting on Reddit. He was there answering questions and we saw his response to a question about the Mt. Gox liquidation:
Question: According to Japanese law, to be able to process the Mt. Gox bankruptcy, trustee Kobayashi has to sell assets (BTC, BCH, BCG) and convert them to Japanese yen. Is that correct?
Karpeles: Yes, this is correct. Actually, this applies to most jurisdictions, bankruptcy means a liquidator is appointed to investigate assets and liquidate them, ie. sell everything.
With that, bitcoin headed down nine percent for the day. Perhaps there had been hope that the trustee would distribute bitcoins to the creditors instead of liquidating them for yen.
Since I posted my lone gunman theory, I have believed that the Mt. Gox bankruptcy liquidation has been the key driver of the bitcoin correction. This morning's price action didn't get me to change my mind.
It is true that bitcoin ran very hard in December on the belief that institutional money was going to come into the bitcoin trade in 2018. This has not happened due to the lack of infrastructure in place for these investors and this has also been part of the problem. Finally, the average holding period for bitcoin is only about ten days. That is, most investors who trade bitcoin do not care about its growing dominance in the field, its decentralized nature, its immutability or its capabilities as the best ledger and accounting system for value. They only care about direction and momentum, and the massive Mt. Gox seller has flipped momentum to the downside.
Cleaning up the Gox trustee here is the key, in my opinion, for the next leg of the bitcoin bull market. The institutional market is coming along, just more slowly than anticipated. If one looks at the depth of the bids in the market now, the bids are starting to massively outweigh the offers. Hopefully, bitcoin finds its bottom down here in the same range as we saw with the early February drop.
Nevertheless, I don't believe that bitcoin's price decline has been fundamentally driven.
Notice: This does not represent investment advice. These are only my opinions and I have no idea if bitcoin will work as an investment.
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