Crypto Rebound Is Off As Market Continues To Decline In Anticipation Of Token Unlocks And User Payouts

The global cryptocurrency market is going through a correction phase, but analysts warn that a wave of token supply events, worth billions of dollars, could delay a rebound scenario even further. 

Bitcoin (BTC), the world’s largest cryptocurrency by market capitalization, has experienced five consecutive days of declines – its longest losing streak since October 2023. Meanwhile, the overall crypto market has tumbled 17% in the wake of the historic mid-March BTC rally to an all-time high of $73,798, to be valued at $2.4 trillion, according to data compiled by Bloomberg News.

Bitcoin Underperforms Due to Lack of Market Inflows Caused by Higher USD Interest Rates

There are a host of reasons why Bitcoin is underperforming – dwindling inflows into the spot BTC exchange-traded funds (ETFs) in the US, the underwhelming debut of spot Bitcoin ETFs in Hong Kong, and the prospect of higher-for-longer USD interest rates by the Federal Reserve. 

Bitcoin began this year on the back of the launch of spot ETFs in the United States, which quickly gained investor demand, propelling the apex cryptocurrency to its highest valuation in history. However, since then the net inflows into the funds have slowed down massively. 

In May, the overall net inflow into Bitcoin spot ETFs in the US is at $11.8 billion following a $169 million outflow recorded so far this month. 

Benjamin Celermajer, director of digital asset management firm Magnet Capital, said that speculators who were betting on the market to continue the strong ETF inflows are now being “washed out by the market”. However, he believes that the bull market has not come to a close and Bitcoin could still scale new heights before the end of the year. 

$2 Billion in Token Unlocks Could Trigger a Bearish Event

In a report published on Wednesday, researchers at crypto analytics firm 10x Research noted that the market for alternative cryptocurrencies (altcoins) could go down much further as a rapid succession of nearly $2 billion in token unlocks is expected during the next ten weeks. 

Large-scale token unlocks are usually considered a bearish event as they increase supply in the market by distributing assets that were previously locked up in vesting contracts to community members, organizations, and early investors in crypto projects, including venture capital firms. 

According to data compiled by 10x Research, over the next two months, $97 million worth of Aptos (APT), $79 million in Starware (STRK), $94 million in Arbitrum (ARB), $53 million in Immutable X (IMX), $330 million worth of Avalanche (AVAX), $64 million in Optimism (OP), $28 million in Prime (PRIME), nearly $1 billion of sui (SUI), $48 million of Ethena (ENA), $171 million of Altlayer (ALT), and $135 million in XAI tokens will be added to circulation. 

The report says that this injection could result in venture capital investors being pressured to “lock in” their recent gains, capping any upside performance of tokens with positive momentum – especially those expecting token unlocks. 

Gemini Earn and Mt.Gox Customers Expected to be Paid Out $11 Billion in Bitcoin

Also, it’s not just altcoins that are facing selling pressure. $11 billion in BTC is expected to be distributed to creditors of the Gemini Earn program and the long-defunct Bitcoin exchange Mt.Gox over the next few weeks. 

Velte Lunde, a research analyst at K33 Research, warned in Tuesday’s report that Mt.Gox’s $9 billion payout to customers could become a “relevant negative price contributor” for the world’s leading cryptocurrency. 

The crypto exchange, which imploded due to a hack in 2024, is preparing to distribute 142,000 BTC worth roughly $9.5 billion and 143,000 Bitcoin Cash worth $73 million to creditors by October. 

Lunde added that crypto investors could expect a wave of fear, uncertainty, and doubt (FUD) in the market over the next few months. 

However, hope still remains on the horizon.

FTX Payout Could be a Bullish Scenario for the Crypto Market

Arthur Cheong, founder and chief investment officer of DeFinance Capital, said in an X post that customer repayments from bankrupt cryptocurrency exchange FTX could offer some relief to the market. 

Pending court approval, between $14-$16 billion in cash could be paid out to FTX’s creditors, and experts anticipate a good chunk of that money to be reinvested into the crypto market. Cheong says at least $3-$5 billion of crypto-native liquidity could be “injected back into the market”. 

More News: FTX Assures Full Reimbursement: Bankrupt Crypto Exchange Customers To Receive Complete Refunds