Bitrabo Editorial
In a recent overview presented by Alex Thorn, the head of research at Galaxy Digital, it is anticipated that the Bitcoin market might not experience as much selling pressure as previously expected following the conclusion of the Mt. Gox bankruptcy case. The process of distributing Bitcoin (BTC) and Bitcoin Cash (BCH) to creditors is scheduled to begin in July, marking the end of a decade-long legal battle that arose from one of the biggest losses in the cryptocurrency realm.
Once a major player in the realm of cryptocurrency exchanges, Mt. Gox managed over 70% of all Bitcoin transactions at its peak. The exchange’s decline started in 2014 when it was uncovered that roughly 940,000 BTC (equivalent to about $424 million at that time) were missing from its reserves, believed to have been stolen or lost. This led to Mt. Gox’s insolvency and a protracted legal and administrative fight to recover the misplaced assets. Over time, 141,868 BTC were recouped, now valued at around $9 billion due to Bitcoin’s price surge.
Assessment of Mt. Gox’s Potential Bitcoin Sell Pressure
Thorn’s evaluation is based on a thorough examination of bankruptcy documents and discussions with the involved creditors. He pointed out that although the original loss was substantial, the recovery process has resulted in a remarkable return for creditors in monetary terms—a 140-fold increase at present valuations.
In his assessment, Thorn specified that about 75% of creditors have chosen the “early payout” option, which incurs a 10% deduction, likely influenced by the protracted nature of the proceedings. This decision results in approximately 95,000 BTC for early allocation, with 20,000 BTC reserved for claims funds and 10,000 BTC set aside for the resolution of the Bitcoinica bankruptcy, leaving around 65,000 BTC/BCH for individual creditors.
Thorn forecasts that the majority of individual creditors, many of whom are long-standing Bitcoin supporters and early adopters, are inclined to hold onto their shares rather than sell. Their historical conduct, such as resisting attractive offers from claims funds, indicates their probable intentions. Thorn stressed the substantial capital gains implications that selling would bring for these creditors, potentially dissuading immediate asset liquidation.
Even if a small fraction (10%) of the 65,000 BTC were to be traded, roughly 6,500 BTC could enter the market, a significantly lower figure than what some market watchers have feared. Thorn anticipates that major exchanges like Kraken and Bitstamp, where these transactions are anticipated to occur, possess ample liquidity to absorb these transactions without major disruption.
Thorn also highlighted the challenges faced by Bitcoin Cash, which was not initially owned by creditors but was obtained through the BTC fork in 2017. With notably lower liquidity and market depth compared to Bitcoin, BCH is likely to encounter increased volatility. He noted that BCH has only $400,000 liquidity on order books within 1% of the prevailing market price, which could intensify price fluctuations as creditors start selling their holdings.
Thorn’s meticulous analysis indicates a modest market impact from the Mt. Gox distributions, with less Bitcoin entering the market than expected and a potentially higher proportion of Bitcoin Cash being traded. He advises stakeholders to closely monitor transaction movements, particularly through platforms like Arkham Intelligence, to track the actual-time consequences as these allocations kick off.
Currently, BTC is trading at $61,405.