Mt Gox is about to unload $9 billion worth of Bitcoin – what it means for BTC

a Bitcoin The exchange, which collapsed after being hacked a decade ago, plans to return billions of dollars worth of tokens to users, leaving investors concerned.

Bankrupt Tokyo-based Bitcoin exchange Mt.Gox plans to begin repaying nearly $9 billion worth of tokens to thousands of users within days. The platform went down in 2014 after a series of robberies that cost between 650,000 and 950,000 bitcoins, or more than $59 billion at current prices.

The payment came after a lengthy bankruptcy process that involved multiple delays and legal challenges.

On Monday, the court-appointed administrator overseeing the exchange's bankruptcy proceedings said distributions to the company's roughly 20,000 creditors would begin in early July. Payments are made in a combination of Bitcoin and Bitcoin Cash, an early derivative of the original cryptocurrency.

This is good news for victims who have been waiting years for their victims to be made whole, but last week the price of Bitcoin fell to $59,000, marking the crypto market's second weekly decline this year. It was the worst.

CNBC this week asked 6 I spoke to a human analyst.

Mt.Gox (short for “Magic: The Gathering Online Exchange”) once claimed to be the world's largest spot Bitcoin exchange, handling around 80% of all global dollar transactions in Bitcoin. .

When it was shut down in February 2014, Bitcoin was worth about $600.

As of Monday, the world's largest cryptocurrency was trading at about $62,000 per coin. This means that users who have opted for an in-kind refund, i.e., a refund in the cryptocurrency itself rather than a cash equivalent, have seen the value of their coins soar more than 10,000% over the past decade.

John Glover, chief investment officer at crypto financial firm Reddon, told CNBC that a windfall for Mt. Gox users could lead to a huge selloff in Bitcoin as investors look to lock in profits. He said that he has a high level of sexuality.

“Many people will obviously cash out and enjoy the fact that having their money stuck in the Mt Gox bankruptcy was the best investment they ever made,” said Glover, a former managing director at Barclays. said. “Obviously some people will choose to take the money and run,” Glover added.

James Butterfill, head of research at CoinShares, told CNBC that the nearly $9 billion Bitcoin surplus scheduled for release “has long been a concern for those who are bullish on Bitcoin.” spoke.

”Therefore, the market is very sensitive to relevant news. Investors are understandably concerned with the Trust's announcement that it will begin sales in July,'' Mr Butterfill said.

This is not the first time Bitcoin has moved in response to large redemptions of funds locked up in centralized trading platforms.

Last month, crypto exchange Gemini returned more than $2 billion in Bitcoin to its users in funds that were locked up in its Earn loan program, and since Gemini suspended Earn withdrawals on November 16th, Bitcoin It recorded a 230% recovery after the price more than tripled.

Analysts at JPMorgan linked this to negative price action, writing in a research note last week: “We believe some of Gemini's creditors, mostly retail customers, have seen at least a partial gain in recent weeks. That's fair.''

Analysts predict that Mt.Gox customers will similarly be inclined to sell some of their Bitcoin to make significant gains in the cryptocurrency.

“Assuming that the majority of liquidations by Mt Gox creditors take place in July, [this] “Cryptocurrency prices are on track to come under further pressure in July, but begin to rebound from August onwards,” they wrote.

Separately last month, the German government sold 5,000 of a pile of 50,000 bitcoins (worth about $310 million at Monday's prices) seized in connection with the Movie2k movie piracy operation. .

According to blockchain information firm Arkham Intelligence, the funds were sent to various crypto exchanges including Coinbase, Kraken, and Bitstamp.

Analysts say these crypto liquidations are also putting pressure on Bitcoin's price.

Most analysts agree that Bitcoin's losses are likely to be contained and short-lived.

Lennix Lai, chief commercial officer at crypto exchange OKX, said: “Any selling concerns related to Mt Gox are likely to be short-lived.”

“Many of Mt.Gox's early users and creditors are long-term Bitcoin enthusiasts, and it is unlikely that they will sell all their Bitcoins right away,” he said, citing the Silk Road incident. He added that there have been past sales cases involving law enforcement agencies. It will not cause continued catastrophic price declines.

Butterfill suggested there is enough market liquidity to cushion the blow from possible mass market selling action.

“Bitcoin has sustained trading volumes of $8.74 billion per day on trusted exchanges this year, suggesting that liquidity will be sufficient to absorb these sales over the summer. “There are,” Butterfill said.

According to Jacob Joseph, a research analyst at CCData, the market is more than capable of absorbing selling pressure.

“Furthermore, a significant number of creditors are likely to take a 10% haircut on their holdings in order to receive early repayment, and not all of their holdings will be liquidated on the open market, so overall “This will reduce the selling pressure.”

Joseph added that recent price movements suggest that the temporary impact of Mt Gox repayments may already be priced in.

Alex Thorne, head of research at Galaxy Digital, believes there will be less coin in circulation than people think, and there will be less selling pressure than the market expects.

However, he also wrote in May that even if only 10% of distributed bitcoins were sold, “it would have an impact on the market.”

“Most individual creditors will be depositing their coins directly into their trading accounts at the exchange, making it extremely easy to sell,” Thorne said.

Vijay Aiyar, head of consumer growth for Asia-Pacific at crypto exchange Gemini, said the overall impact of Mt. Gox’s spending will “dissipate” given the diversity of recipients of funds. He said it was highly likely.

On the other hand, there are also individual holders who get their hands on Bitcoin quickly. There is also a “significant amount” of Bitcoin paid into the insurance claims fund, Aiyar said.

“These funds have to distribute these to LPs. [limited partners]So that adds a time element to the price impact and the whole process could take longer,” he told CNBC.

It is worth noting that there are many other reasons behind Bitcoin's recent decline.

The cryptocurrency saw an incredible rally earlier this year, surpassing $70,000 following approval of the first spot Bitcoin ETF by the U.S. Securities and Exchange Commission.

However, investors remain concerned amid outflows from Bitcoin ETFs and large-scale market liquidations. The broader macro environment is also worrying investors.

Earlier this month, the Fed signaled it plans to cut interest rates only once this year, cutting back on the multiple rate cuts it had previously signaled.

Cryptocurrencies are inherently volatile and therefore particularly sensitive to changes in the interest rate environment.

CoinShares' Butterfill said the Fed's new interest rate forecast is one of the “likely causes of the recent price decline” in Bitcoin.

This, along with other issues, “is likely to weigh on prices during the low summer production period,” Butterfill said. But “the basic investment case remains largely intact,” he added.