Before we dive into this Monday’s edition of Crypto Crisp, we want to announce a format change. Starting today, the ‘Charting Crypto’ section will only feature the most intriguing charts we have discovered over the past week. Instead of showcasing four to five recurring charts that may not always be interesting, we will focus solely on the most noteworthy ones. This change aims to make the note more actionable, presenting only the most pertinent information.

Now, let us get started. The entire market took a significant hit on Thursday and Friday last week, with both Bitcoin and Ethereum experiencing substantial losses. This was primarily driven by news that the Mt. Gox estate has begun repayments to creditors and the continued transfers from the German government to exchanges and market makers.

We believe the market has overreacted to the Mt. Gox news. As we argued in Crypto Moves #31, few of these bitcoins are likely to hit the market in the near term. Most of the recent price impacts have been driven by fear of potential selling pressure from Mt. Gox and the German government, rather than actual selling. So far, Mt. Gox has only paid out around 1,545 bitcoins to creditors, while the German government has transferred about 23,500 bitcoins to exchanges and market makers, representing nearly 50% of its Bitcoin holdings, with the majority transferred today. The activities by the German government, especially today, have highlighted that it is fear, not actual selling pressure, affecting the market.

In our view, this pervasive fear presents a prime opportunity to accumulate Bitcoin, Ethereum, and other altcoins. In other words, now is the time to buy the dip. Our Principal Component Analysis (PCA) model also indicates that the market is undervalued, as we are currently about two standard deviations below the fair price for Bitcoin and Ethereum. There is much more on this belief below.