Our experts explained why the market is reacting to rumors about the sale of Bitcoin by the bankrupt Mt.Gox exchange. And how it could actually affect the price of the cryptocurrency.
Bitcoin dropped sharply by 8% on rumors that wallets holding Mt.Gox coins were making transactions. It quickly became clear that the information was caused by a technical error. But this incident clearly demonstrated the market reaction to the possible sale of thousands of coins of the bankrupt exchange.
Mt.Gox was one of the largest cryptocurrency exchanges in the world. It operated from 2010 until it declared bankruptcy in 2014 after a series of hacks. At its peak, Mt.Gox accounted for about 70% of total Bitcoin trading volume. The 2014 hack resulted in 850,000 bitcoins stolen from Mt. Gox, worth $17.8 billion at current exchange rates.
The bankruptcy of the exchange led to a 7.5-year legal battle. Before a solution in the form of a plan to rehabilitate the affected users was developed in 2021. Since not all of the stolen coins could be recovered. They will be compensated only a part of the original amount – about 200 thousand BTC. The deadline for payment is set for September 30. $1.7 billion, 141 thousand BTC and 142 thousand more Bitcoin Cash (BCH) coins will be distributed under the civil recovery plan. Which is designed for 10,000 customers worldwide.
In the afternoon of April 26 bitcoin rate exceeded $30 thousand. However, in the evening the value of the asset began to decline sharply and fell to $27.6 thousand. By the morning of April 27, the price of the asset has recovered to $29 thousand. In the cryptocommunity bitcoin decline was associated with rumors of bitcoin sales Mt.Gox.
However, later analytics platform Arkham Intelligence. which initially sent out such warnings, reported that the data had been misinterpreted.
“Mt. Gox Bitcoins” have been a hot topic for retail traders for years
This is largely due to the fact that trading robots react to headlines of this kind. As the April 26 incident showed, the mere mention of an exchange’s name is enough for the market to react. In this case, even if the assets are not directly related to the wallets where Bitcoins of hacked users are actually stored.
The system of payments is “rather confusing”, and does not provide some kind of one-time payment to all victims. In addition, it may be profitable for the fund manager to delay the process. At the same time making sure that the payment of compensation does not happen quickly and at one time.
Some of the affected users have chosen compensation in cryptocurrency. And the other part of them chose to receive a bank transfer at a rate several times lower than the current market rate. Some chose to get a smaller amount at an early date. And others chose to get a larger amount within a few years, and so on. Thus, it is impossible that the entire mentioned amount of 140 thousand BTC will somehow be sold at one time on the exchange, our experts explain.
Payments to affected users
In February 2014, when Mt.Gox went bankrupt, Bitcoin was trading at about $550. Given the payouts at the current rate, customers could theoretically get their coins back at a high profit. But given that the affected users will receive payouts in installments. How they will use them is a big question. It is not the fact that they will decide to sell them at once. And not to take advantage of the OTC-platforms without affecting the open market.
Fears about selling cryptocurrency confiscated by the U.S. government should be perceived in the same way. Such coins are sold at auctions. And, as a rule, afterwards, they do not go directly to the exchange glass. For the amounts of such an order and there is a market OTC, explains our expert.
The first official buyer of confiscated Bitcoins is investor Tim Draper. In 2015, he managed to win an auction to distribute Bitcoins to Silk Road, the first ever illegal online marketplace. Draper has never disclosed at what rate he got the coins. He is an outspoken supporter of cryptocurrencies and predicts the first cryptocurrency will rise to the $250,000 mark in 2024.