Mt. Gox's Bitcoin (BTC) Selling Pressure Could Be Way Overestimated

In thorough analysis shared via X, Alex Thorn, the esteemed head of research at Galaxy Digital, has forecasted that the Bitcoin market may encounter less sell pressure than originally anticipated

The resolution of the Mt. Gox bankruptcy case will see creditors receive distributions of Bitcoin (BTC) and Bitcoin Cash (BCH) starting July, finally concluding a decade-long legal ordeal that resulted in one of the most substantial losses in crypto history. As the dust settles, an analysis by Alex Thorn, head of research at Galaxy Digital, suggests that the market may face less sell pressure than widely anticipated from the mass crypto distribution event expected to occur. In an analysis shared via Twitter, Thorn delved into the matter, providing insights into the bankruptcy filings and conversations with the creditors involved. While the original loss was substantial, the recovery process has yielded a significant return for creditors in dollar terms—a 140-fold increase based on current valuations. The analysis highlighted the “early payout” option available to creditors, which comes with a 10% reduction but has been selected by around 75% of them, likely due to the prolonged nature of the proceedings. This leaves around 95,000 BTC for early distribution. From this, 20,000 BTC are allocated to claims funds, and 10,000 BTC are set aside for the resolution of the Bitcoinica bankruptcy, reducing the number available to individual creditors to approximately 65,000 BTC/BCH. According to Thorn’s assessment, the majority of individual creditors, many of whom are likely to be long-time Bitcoin enthusiasts and early adopters, are likely to retain their shares rather than sell. Their past behavior, such as resisting “compelling & aggressive offers” from claims funds, is indicative of their likely intentions. Thorn also noted the substantial capital gains impact that selling would have on these creditors, which could further deter the immediate liquidation of their assets. Even if a small percentage (10%) of the 65,000 BTC were to be sold, it would amount to around 6,500 BTC potentially entering the market. This figure is considerably lower than some market speculators have feared. Thorn anticipates that these transactions will be absorbed by the market without significant disruption, given the robust liquidity of Bitcoin on major exchanges like Kraken and Bitstamp where these transactions are likely to occur. However, the analysis also highlighted particular challenges for Bitcoin Cash, which was not originally owned by the creditors but came into their possession through the BTC fork in 2017. With significantly lower liquidity and market depth compared to Bitcoin, BCH is poised to face greater volatility. As Thorn pointed out, BCH has only $400,000 liquidity on order books within 1% of the current market price, which could amplify price movements as creditors begin to sell their holdings. Overall, Thorn's comprehensive analysis suggests a moderate market impact from the Mt. Gox distributions, with a lower-than-expected volume of Bitcoin hitting the market and a potentially greater proportion of Bitcoin Cash being sold. He advises stakeholders to monitor transaction movements closely, particularly through platforms like Arkham Intelligence, to track the real-time impact as these distributions begin. At press time, BTC trades at $61,405.

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