Mt. Gox fails to navigate the HODLer prisoner’s dilemma

This “prisoner’s dilemma” has nothing to do with any crypto CEOs actually in prison.

7/5/24 5:09PM

One of the funnier aspects of the bitcoin investor community is the widely accepted belief that one should “HODL” (a reference to a 2013 forum post in which a bitcoin trader misspelled “hold”) their bitcoin through the ups and downs of price fluctuations indefinitely. This idea never really made sense to me: on a long enough time horizon, every investment should, at some point, be sold to realize gains. But, in the case of bitcoin, I guess the idea is that if everyone buys, and everyone HODLs, but no one sells, then the price can only go up.

(New BTC does enter the market via mining, but only ~900 coins are mined per day, and that quantity will decrease over time as bitcoin approaches its maximum 21 million supply. There are currently 19.8 million outstanding bitcoin)

The issue with HODLing is that it introduces a prisoner’s dilemma: as long as no one sells, great, the price keeps going up! But if everyone buys and holds, bitcoin will grow increasingly illiquid, and one or two sizable sales could tank the entire market.

Now, I know what you’re thinking, you hear the phrase “crypto prisoner’s dilemma” and you think it must involve any of the many, many crypto CEOs that are currently serving a sentence as a guest of the government. Not quite.

Last week, CNBC reported that 140,000 previously lost bitcoin were about to hit the market again after a decade-long bankruptcy involving a now-defunct crypto exchange has finally progressed:

Mt. Gox, the Japanese bitcoin exchange that collapsed into bankruptcy a decade ago after a major hack, is finally set to repay creditors, who are being rewarded handsomely for their patience.
Up to 950,000 bitcoin were lost in the 2011 hack, at a time when the cryptocurrency was trading for a tiny fraction of its current value. Some 140,000 of those coins were recovered, a haul that, at today’s prices, means that roughly $9 billion worth of bitcoin will be returned to its owners.

This, of course, led to bitcoin hitting its lowest price in five months, as my colleague Toby mentioned earlier today:

The original cryptocurrency is suffering a meltdown in price after long-defunct crypto exchange Mt Gox moved over 47,000 bitcoin (well over $2 billion) to start repaying its $9 billion debt to former customers. Following last night’s moves, bitcoin dipped below $55,000, a price it hasn’t touched since February.

A $9 billion payout may not sound that big, considering that bitcoin’s market capitalization is larger than $1 trillion, but bitcoin is an illiquid market. Daily trading volume for the crypto currency only surpassed $30 billion five times in June, compared to a sub-$20 billion volume eight times, meaning that $9 billion of new supply can absolutely impact its price. If you are a bitcoin HODLer, you now have to perform some mental calculus: will the creditors, who have waited a decade to receive their collective $9 billion, HODL? If you believe that many of them will instead look to sell, you might sell to front-run their potential selling, which would send bitcoin’s price lower, which might incentivize other HODLers to sell as well.

Considering that only “some” of the $9 billion bitcoin has so far been distributed to creditors, and trading volume in bitcoin yesterday hit $57 billion, its highest level in a month, it appears that some HODLers did, in fact, stop HODLing. Crypto really is game theory all the way down.

Sage D. Young6/16/26

Hyperliquid reclaims all-time high

HYPE, the native token powering perpetuals exchange Hyperliquid and its underlying blockchain, rebounded to reclaim its all-time high previously set at the start of the month.

Treasury firms Hyperliquid Strategies and Hyperion DeFi have also rallied as the token increased double digits in the last 24 hours to trade as high as $76.70, rising past its record price set nearly two weeks ago, according to CoinGecko. In the interim between all-time highs, HYPE pulled back to around $53.

The token has several tailwinds, the first coming from ETF flows. Since their inception in May, HYPE ETFs have yet to record negative weekly outflows, posting a cumulative total net inflow of $171.8 million, per SoSoValue.

The second comes from Hyperliquid spending basically everything it earns in fees to buy HYPE, a mechanism embedded into the protocol’s codebase.

The venue’s buyback funding mechanism is set to add a new source of yield. Validators of the network activated “AQAv2,” which means stablecoin deployers will share about 90% of reserve yield revenue on their supply within the protocol.

Around $6.1 billion of Circle’s USDC resides in Hyperliquid, per DefiLlama. Accrual begins on August 26 and the first payment is made on October 3, the network announced in its Discord channel last week.

A substantial amount of capital is riding on different positions of HYPE. In total, a move down to under $53 would result in the liquidation nearly 1.8 million HYPE worth of leveraged long positions on the on-chain perps venue, or $131.7 million, data from CoinGlass shows. For the upside, a climb above $100 results in the liquidation of more than 3 million worth of leveraged HYPE short positions, or $221.5 million.

HYPE’s rebound to all-time high comes after Michael Selig, chair of the Commodity Futures Trading Commission, defended his agency’s decision to approve regulated perpetuals, or futures contracts without expiration dates, CNBC reported on Monday.

Last month, the CFTC approved bitcoin perpetual futures trading in the US through regulated prediction markets firm Kalshi and an affiliate of centralized exchange Coinbase.

“Perps are highly likely to become lightly regulated and thus approved in the US,” said David Pakman, head of venture investments at CoinFund.

“We expect to see perps for many different types of assets, from commodities to equities,” Pakman told Sherwood News.

Yaël Bizouati-Kennedy

6/16/26

Bitcoin is “caught between flow deterioration and macro relief”

Sage D. Young6/15/26

Crypto market snaps back as sentiment lifts, with altcoins from ethereum to XRP soaring

The market capitalization of the crypto industry has jumped around $83.2 billion in the last 24 hours, with privacy-focused token Zcash and worldcoin, the native cryptocurrency of the network backed by OpenAI CEO Sam Altman, leading market gains, jumping over 22%.

But the last 24 hours have been good across the board:

Ethereum has increased more than 9% to trade above $1,800, amid BitMine Immersion Technologies acquiring $139.2 million worth of ethereum.
XRP and solana have rebounded from multiyear lows, each rising roughly 10%.
HYPE has bounced up 12%.
Dog-based memecoins dogecoin and shiba inu have chased gains of more than 4%.

“Investors have been eager to see some positive signs around the Iranian conflict ending, coupled with hopeful outlooks around the CLARITY act, both breathing some life into assets,” Kairos Research cofounder Ian Unsworth told Sherwood News.

Simon Shockey, a crypto strategist at crypto wallet infrastructure firm Privy, said the upswing stems from several things converging. He pointed to how alt markets broadly were “very oversold” following the bug found in Zcash that shook confidence.

Friday, Zcash founder Zooko Wilcox said Anthropic didn’t find any more serious bugs with the Zcash protocol after Shielded Labs requested the AI firm run a security audit of the network with Mythos.

Shockey added that the pool of willing sellers has dwindled. “Even if structurally, AI is a much more compelling and asymmetric bet in the eyes of allocators, many of these crypto assets have simply run out of marginal sellers despite some shorter-term narrative-driven pumps. The only people left to sell at this point are the teams themselves and VCs.”

“Net-net: oversold conditions plus exhausted seller bases plus a macro backdrop that’s stabilized equals a snapback, especially in names that have real usage or community conviction behind them,” Shockey told Sherwood.

Yaël Bizouati-Kennedy

6/15/26

Bitcoin hits highest level in 2 weeks following news of Iran deal

Bitcoin crossed $66,500 Monday morning as the broad crypto market welcomed the return of a risk-on mood.