Show the other side OPPOSITE the "hole." If it is flat, someone 'Punched" the Mint mark area. Otherwise may be mint error but cannot tell from photo.
Looking at the entire obverse of this nickel I can see a lot of PMD. It also has scratches from a coin rolling machine. Inside of what you are asking about appears to be a faint "S" but it is strong enough to show in the photo. 1968-S were used for circulation so I would call this PMD.
Here is the other side. That blows my theory. Still think it is a purpose-made gouge into the coin. That would NOT flatten the rev. Also, looks like a "D" to me as the "S" shape is too large; however, if it were flattened it would spread. Nevertheless, the raised mark that looks like the top serif of the "S" is too large...so "D."
The second photo showes a lighting highlight on the right side of the anomaly which would indicate pushed up metal from damage. PSD