Defunct cryptocurrency exchange Mt. Gox has confirmed that creditors will begin receiving their funds in July following years of horse trading with bankruptcy proceedings.
According to available reports, 142 Bitcoins (BTC) are expected to be returned to creditors as early as next week, with investors watching the horizon with bated breaths. The assets to be disbursed are virtual currency holdings belonging to Mt. Gox’s users before a jarring 2014 hack that rocked the exchange.
At the time, nearly 740,000 BTC were pilfered from the exchange, worth around $15 billion at today’s prices, forcing the company to begin a drawn-out recovery process. A repayment plan received the blessings of creditors, with a Tokyo-based court ordering trustees to effectuate repayment before the end of October 2024.
Since the announcement, BTC’s price tumbled below the $60K mark amid fears that the repayment could have an unsavory effect on the valuation of the largest virtual currency. A recent research note from JPMorgan highlighted the potential of downward pressures from releasing a large cache of bitcoins to Mt. Gox’s creditors.
The rationale for the downward pressures revolves around the theory that Mt. Gox’s creditors may sell off a chunk of their assets upon receiving them to take profits. In the event of a sale, up to $9 billion worth of BTC could change hands, a move that could send BTC’s price lower than the $50K mark.
JPMorgan’s lead analyst Nikolaos Panigirtzoglou urged market participants to brace for a massive selloff, citing similar behavior by Gemini creditors. Upon reaching a settlement with Genesis, Gemini Earn users dumped a portion of their assets, triggering a mild price correction for the leading virtual currencies in the ecosystem.
“This fear is justified given the recent behavior of Gemini creditors which are assumed to have liquidated part of the crypto assets received in recent weeks,” read the JPMorgan report.
However, it is not all doom and gloom for BTC as JPMorgan’s report argues that the asset is poised to recover its projected losses in August. The research analysts point to the incoming cash payments to FTX creditors and reinvestments as a tailwind expected to prop up BTC prices.
Just a small blip
While the rest of the markets are bracing for impact, a cross-section of investors is downplaying the potential impact of the Mt. Gox repayments on asset prices. Sam Callahan, an analyst at Swan Bitcoin, described reports of a wide selloff as “overblown,” arguing that creditors’ failure to sell their claims since 2014 is a tell-tale sign.
“Creditors who wanted to sell their Bitcoin have had more than 10 years to do so by selling their bankruptcy claims to more convicted, long-term investors,” said Callahan. “Additionally, most creditors will likely hold their Bitcoin because their cost basis is less than $700 per Bitcoin.”
Several pundits say the falling values have little to do with Mt. Gox’s repayment plan but are the direct results of a long squeeze exacerbated by an industry-wide selloff by miners.
