TLDR
Mt. Gox is set to begin repayments of approximately $8.5 billion worth of Bitcoin to creditors in July.
Analysts suggest the impact on Bitcoin’s price may be less severe than many expect, with estimates that only about 65,000 BTC of the total 141,687 BTC may actually hit the market.
Many creditors are believed to be long-term Bitcoin holders who may not immediately sell their received Bitcoin.
The potential selling pressure on Bitcoin Cash (BCH) could be more significant than on Bitcoin (BTC).
The news of the upcoming repayments caused a brief dip in Bitcoin’s price, driving it below $60,000 for the first time since early May.
There has been much speculation about the potential impact of Mt. Gox’s upcoming Bitcoin repayments to creditors.
Set to begin in July, these repayments, totaling approximately $8.5 billion worth of Bitcoin, have raised concerns about a possible flood of Bitcoin hitting the market and driving down prices. However, several analysts and market observers suggest that the effect may be less dramatic than many fear.
Mt. Gox, once the world’s largest Bitcoin exchange, collapsed in 2014 after losing around 940,000 BTC to hackers. At the time, this amount was worth about $64 million. In the years since, the exchange’s trustees have recovered 141,687 BTC, now valued at approximately $8.5 billion, to be returned to creditors.
Despite the substantial sum involved, IG Markets analyst Tony Sycamore told Cointelegraph that much of the supposed Mt. Gox sell pressure may already be priced into current market conditions.
“The repayments have been coming for a long time,” Sycamore noted, adding that the crypto market has recently seen outflows to equities and deteriorating sentiment, which could have absorbed some of the anticipated impact.
Galaxy Digital’s head of research, Alex Thorn, provided a more detailed breakdown of the potential selling pressure. In a post on social media platform X, Thorn estimated that only about 65,000 of the total 141,000 BTC might actually hit the market. This significant reduction in potential selling activity is based on several factors.
creditors have been stuck in mt gox bankruptcy for 10+ yrs–finally trustee says in-kind distribution of #BTC #BCH will begin in july. we think fewer coins will be distributed than people think & that it will cause less #bitcoin sell pressure than market expects
here's why ????
— Alex Thorn (@intangiblecoins) June 24, 2024
Thorn predicted that approximately 75% of creditors have opted for an “early” payout, sacrificing 10% of their repayment in the process. This would result in about 95,000 BTC hitting the market initially. However, 20,000 BTC is owed to claims funds, and roughly 10,000 BTC is owed to Bitcoinica BK, leaving just 65,000 BTC to regular creditors.
Thorn and other analysts believe that many individual Mt. Gox creditors may be more inclined to hold onto their Bitcoin rather than immediately sell. Sam Callahan, senior analyst at Swan Bitcoin, pointed out that
“Creditors who wanted to sell their bitcoin have now had more than 10 years to do so through selling their bankruptcy claims to more convicted, long-term investors.”
Several factors support this “diamond-handed” theory. Many of the creditors are thought to be long-term Bitcoin enthusiasts who are more likely to hold their recovered assets.
Many individual creditors resisted years of “compelling and aggressive offers” from claims offering payouts in U.S. dollars, suggesting a preference for Bitcoin over fiat currency.
The potential impact of capital gains tax on sellers is another consideration. While original creditors are receiving only a 15% in-kind recovery, many claim holders have seen a 140-times gain since the bankruptcy proceedings recovered their Bitcoin. This significant appreciation could deter immediate selling.
Analysts suggest that the selling pressure on Bitcoin Cash (BCH) could be “far worse” than on Bitcoin. This is because many investors never actually bought BCH outright, only receiving it due to the hard fork of Bitcoin that occurred in 2017.
~25K BTC from Mt Gox has moved in the last hour, likely the beginning of distributions to creditors
i sent a note to GLXY clients & counterparties a couple weeks ago with estimated payout amounts
i personally expect most BTC gets hodl’d, but i can’t say the same for the BCH pic.twitter.com/0f0LWOqGtc
— Alex Thorn (@intangiblecoins) May 28, 2024
Despite these reassuring analyses, the news of the upcoming Mt. Gox repayments has already had some impact on the market.
Bitcoin’s price briefly dipped below $60,000 for the first time since early May, dropping more than 4% on Monday following the announcement of the impending distributions.
However, Sycamore remains optimistic about Bitcoin’s price action in the coming weeks, pointing to strong support at the 200-day moving average.
He suggested that the recent price dip “probably offers a pretty good entry point for people that have been holding on for better buying levels.”
The post Breaking Down the Mt. Gox Bitcoin Distribution: What to Expect appeared first on Blockonomi.