Over $170 billion wiped off cryptocurrencies as market tanks on Mt. Gox bitcoin payout fears

Cryptocurrencies plunged Friday as investors focused on the payout of nearly $9 billion to users of collapsed bitcoin exchange Mt. Gox.

As of 10 a.m. ET, bitcoin's price fell 3% to $55,591.58 in the last 24 hours, according to data from CoinGecko.

The world's biggest cryptocurrency had previously slumped as low as $54,500.53, marking its first time trading below the $55,000 level since Feb. 27.

Rival token ether, meanwhile, sank around 5% to $2,972.82.

At one point in time, the entire cryptocurrency market had shed more than $170 billion in combined market capitalization in a 24-hour period, according to CoinGecko data.

On Friday, the trustee for the Mt. Gox bankruptcy estate, Nobuaki Kobayashi, said in a statement that it had begun making repayments in bitcoin and bitcoin cash to some of the creditors through a number of designated crypto exchanges.

Mt. Gox's trustee didn't specify how much money had been transferred to these exchanges.

He noted that the remaining funds would be returned to creditors once a series of conditions is met, including confirming the validity of registered accounts and completing discussions between the trustee and the designated crypto exchanges.

The trustee is still working to ensure repayments "can be made safely and securely," Kobayashi wrote, urging "eligible rehabilitation creditors to wait for a while."

It comes after a small amount of bitcoin was moved out of wallets associated with Mt. Gox, according to blockchain analytics firm Arkham Intelligence, with the largest movement being a $24 transfer to the Japanese crypto exchange Bitbank.

Bitbank is among the recipients listed to support repayments.

Recently, the world's largest cryptocurrency has been pressured by news of collapsed bitcoin exchange Mt. Gox preparing the distribution of around $9 billion worth of coins to users.

This dumping of coins onto the market is expected to lead to some significant selling action.

The slump in crypto prices led to hefty liquidations in the derivatives markets, according to crypto data firm Coinglass, which suggests that 229,755 traders had their positions worth a combined $639.58 million liquidated in the past 24 hours. Of this sum, $540.46 million represented long trades — financial positions taken when an investor expects the price of an asset to appreciate over the long term.

Also pressuring crypto markets, the German government on Thursday sold roughly 3,000 bitcoins — worth approximately $175 million as of today's prices — from a 50,000-bitcoin pile seized in connection with the movie piracy operation Movie2k, according to Arkham Intelligence.

Arkham, which is tracking Germany's bitcoin wallet, noted the government still holds more than 40,000 bitcoins worth over $2 billion.

Industry insiders still expect bitcoin prices to climb again toward the end of the year, once the expected near-term selling pressure from the Mt. Gox repayments lifts.

Analysts at crypto data and research firm CCData said in a report Tuesday that bitcoin hadn't yet reached the top of its current appreciation cycle and is likely to hit a fresh all-time high.

Historical market "cycles" have shown that bitcoin's so-called halving event — which cuts the supply of new bitcoins to the market — has always preceded a period of price expansion that can last between 12 and 18 months "before producing a cycle top," CCData said in its report.

The last bitcoin halving took place on April 19 this year, so those historical time frames have yet to pass.

"Moreover, we have observed a decline in trading activity on centralised exchanges for nearly two months following the halving event in previous cycles, which seems to have mirrored this cycle. This suggests that the current cycle could expand further into 2025," CCData said.

Tom Lee, co-founder and head of research at Fundstrat Global Advisors, told CNBC's "Squawk Box" on Monday that he still sees bitcoin hitting $150,000 despite the "overhang" from Mt. Gox's upcoming disbursement of tokens to creditors.

"If I was invested in crypto, knowing that one of the biggest overhangs is going to disappear in July, I'd think it's a reason to actually expect a pretty sharp rebound in the second half," Lee said.

Investors are still awaiting the launch of an ether exchange-traded fund in the U.S., which would follow the approval of the first U.S. spot bitcoin ETF in January.

In May, the U.S. Securities and Exchange Commission approved a rule change that would pave the way for ETFs that buy and hold ether.

VanEck, BlackRock, Bitwise and Galaxy Digital are among the companies looking to launch their own ether ETFs.