Crypto markets are reeling as the long-dreaded Mt. Gox BTC starts moving to third parties for repayment to former users of the defunct exchange.

Why it matters: It's billions of dollars' worth of bitcoin that could go out for sale, dampening price.

• The market has long feared the return of this giant stash.
• About $2.5 billion (at today's price) of BTC moved today. There's about another $5 billion worth to go.

The latest: Bitcoin is down 10% over the last seven days, according to CoinGecko.

• At least a couple of users in the mtgoxinsolvency subreddit said they are getting BTC. These appear to be creditors in Japan (where Mt. Gox was based).
• There has been reporting that the impact of Mt. Gox's distribution will be less than anticipated.

Zoom in: On June 24, the Mt. Gox website posted a notice that distributions would begin in early July. Today, it wrote that some repayments have begun, but that it's waiting on several conditions to be met for others.

• It did not say which ones had not met the conditions.
• Axios contacted Kraken, Bitstamp and BitGo, three of the known redistribution partners. Of those, only BitGo has replied at press time, declining to comment.
• Mt. Gox's statement today ended by saying, "We ask eligible rehabilitation creditors to wait for a while."

Catch up fast: Mt. Gox was the most popular exchange in the world for trading BTC until it became insolvent and shut down in 2014.

• During bankruptcy, thousands of BTC were found.
• These were not enough to replace all the BTC the exchange lost, causing the shutdown, but in the intervening decade, that stash's value ballooned in dollar terms.

What they're saying: "Got all my coins 2 hours ago. Japanese exchange. Sold my cost basis and was able to initiate a bank transfer. Will hodl the rest while I figure out a tax minimization strategy. Going to miss this sub....?" Reddit user heartface wrote this morning in the subreddit devoted to waiting for refunds.

• "Goodbye friend I hope to never see you again the best possible way 😁," user ValdemarrPlanB, replied.

Zoom out: Some other large caches of bitcoin are also moving around. The U.S. and German governments have sent over $700 million worth of bitcoin to trading venues, suggesting they could be preparing to sell.

• The whole market is red.

What we're watching: When and if prices recover. Is this a short-term panic or does the new supply dampen the mood out there?

• The most popular strike price for BTC future calls on Dec. 27 is still $100,000 on Deribit.

Venture capital activity in crypto is a comeback story, s l o w l y gathering steam after the 2022-2023 slump.

Why it matters: The crypto VC market continued to rebound in the second quarter even though bitcoin's performance wasn't as strong.

• That's according to Galaxy Research, citing founders and investors saying April to June was a more active fundraising environment than prior quarters.

Between the lines: "Allocators may be preparing to return in earnest due to the resurgence of liquid crypto," Galaxy Research's Alex Thorn and Gabe Parker wrote in their report, saying that could lead to greater VC activity in the second half of the year.

Flashback: Early-stage startups got a larger piece of the pie than later-stage ones, with 78% of second-quarter capital allocated to the former and 20% to the latter.

• Early-stage venture funds still have cash to deploy, while larger, more generalist VCs have left the sector or downsized investments of that ilk.

What we're watching: Crypto firm valuations spiked in the second quarter, or 94% from the prior, reaching the highest levels since the fourth quarter of 2021.

• "Despite no significant increase in investment capital, founders have leveraged interest and competition among the existing investor base," the report said.

Yes, but: Median valuation data was as of July 1, meaning it can be adjusted as more Q2 deals are reported, they added.

Zoom in: Companies in the web3, NFT, DAO, metaverse and gaming categories raised the largest share of capital in the second quarter, or roughly $758 million.

• Decentralized social media network Farcaster's $150 million raise, and gaming guild Zentry's (aka GuildFi) $140 million round, were the largest in that bucket.
• Investments in infrastructure, trading and layer 1 firms followed, with those three buckets getting roughly the same 12% to 15% of capital invested in the second quarter.

Our thought bubble: Crypto's turnaround in crypto equity and token investments is visible too, per our Fintech Pro colleagues, though still second to AI.

😈 Governments around the world have $17 billion worth of BTC. (Decrypt)

🐦‍🔥 One mining pool nearly took over Bitcoin Cash this week. (The Miner Mag)

↘️ Crypto market stocks are also tanking. (CoinDesk)

Speculative traders are increasingly lining up behind Vice President Kamala Harris, betting that she will prevail over President Biden for the Democratic nomination.

• They turned on Biden quickly after last week's debate debacle.

Zoom in: Odds on Harris hit 42% today on Polymarket, edging out Biden.

• FWIW — our politics colleagues say she'd be unbeatable for the nomination if Biden stepped aside.

The other side: Meanwhile, the odds of Biden dropping out of the race surged to 66% and have been rising since the debate.

The big picture: Former President Trump, the presumptive GOP pick, has a 62% chance of winning the election, according to the speculators.

• Harris' chances are 15% in that pool, just above Biden's odds of 12%.

Our thought bubble: 👆That appears to have improved slightly for Biden, from the single digits seen on July 4, per Polymarket's tweet.

BTW, there's a deliberately misspelled joke coin inspired by the VP, a la the Boden and Tremp coins, called Kamala Horris (KAMA) on Solana.