Mt. Gox Creditors Reward May Not Brutally Impact Bitcoin Price as Expected

The infamous Japanese crypto exchange, Mt. Gox is officially set to reward creditors with repayment after suffering a brutal hack in 2011 and collapsing into bankruptcy.

Bankrupt Japanese crypto exchange Mt. Gox is set to begin repaying creditors with剩余的比特币 (BTC) and Bitcoin Cash (BCH) holdings following a brutal hack in 2011. However, market insiders are expressing concerns over the potential impact on the Bitcoin price as fears of mass selling escalate.

Digital asset management firm CoinShares has released a comprehensive report investigating the matter amid the already dwindling broad market price.

According to the report, the Japanese trustee acting on behalf of the exchange, Nobuaki Kobayashi, holds around 142,000 Bitcoin and the same amount in Bitcoin Cash. At the time of Mt. Gox shutting down, this amount of BTC was valued at $75 million. Currently, it is valued at $8.85 billion, with Bitcoin Cash pegged at $55,250,000.

At the time of the repayment announcement, creditors were given the option to choose between a full cash repayment and full repayment in kind. The latter suggests that creditors get back Bitcoins instead of cash plus cash. According to the CoinShares report, the majority of creditors received the rest of their assets in either Bitcoin or Bitcoin Cash. Additionally, all creditors have or will receive some amounts in cash.

As reported by Crypto News Flash earlier, the in-kind repayment was scheduled to begin this month (July). Notably, the potential impact on the Bitcoin price had sellers rushing to close their positions or sell off their assets, which is evident in the ongoing broad market bloodbath. BTC has shed over 15% in the last 30 days, currently trading at $58k.

CoinShares report suggests that data indicates the Mt. Gox overhang might not be as brutal as expected, with the main reason being that only 75% of creditors took a deal to take an early lump sum of around 90% of the owed amount (in kind). The rest agreed to wait till the end of the civil litigation, which could take a long time to resolve. This brings down the supply to be distributed this month to 95,000 Bitcoin. It is also known that 20% of the claims are owed to Bitcoinica and MtGox Investment Funds (“MGIF”), who also agreed to a 10% discount on their claims. Specifically, 10,000 BTC is owed to Bitcoinica, and 20,000 BTC is owed to MGIF.

According to the report, MGIF has stated publicly that it has no plans to sell its BTC holdings. This brings down the 95,000 Bitcoins to be sold to 75,000 BTC, out of which 20,000 BTC is owed to Botanica. Interestingly, the distribution would occur on different exchanges at different dates within the month, reducing the possibility of a large concurrent selling.

The average daily exchange inflow is 32,000 Bitcoin with records that 100,000 Bitcoin have been sent to exchanges on multiple occasions. On the day of the spot Bitcoin Exchange-Traded Funds (ETFs) launch on January 11, just under 150,000 Bitcoin daily inflow was recorded.

CoinShares report suggests that the number of large inflows recorded in the past could help in indicating that the market could easily cope with the large volumes if all of these assets were sold in a day. According to the report, liquidations from Grayscale ETF this year have already tested this.

CoinShares does note that Bitcoin Cash would suffer because it is a much less liquid asset and not nearly as liked by investors.

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