Mt. Gox Reimbursement To Investors Could Result In A Bitcoin Dump, Reduce Value
Japanese crypto exchange Mt. Gox will pay 142,000 Bitcoins (BTC) to its creditors. These creditors had their investments locked when the exchange became bankrupt in 2014 following a hack, which led to around 850,000 Bitcoins getting stolen.
In a letter sent out in July, the trustee of Mt. Gox’s remaining funds said they will start paying out creditors by the end of August.
The Mt. Gox Saga
Mt. Gox was one of the biggest exchanges around the early years of Bitcoin adoption. In February 2014, the exchange incurred a huge loss. The exchange suspended withdrawals in early February 2014, claiming to have discovered suspicious behaviour in its digital wallets. Hundreds of thousands of Bitcoins were lost by the exchange. The number of coins reported missing ranged from 650,000 to 850,000. By the end of the month, the company suspended withdrawals and halted trading, which led to a 36 per cent decline in the price of Bitcoin by February-end, which was around $540 for one Bitcoin.
The local and International authorities were able to relocate around 200,000 Bitcoins, resulting in a destabilised market. Mt. Gox filed for bankruptcy in the Tokyo District Court and was subsequently ordered to liquidate in April 2014. Then, Mt. Gox’s assets were placed in an estate that included over 200,000 Bitcoin and Bitcoin Cash.
Some Bitcoin has already been sold ahead of the upcoming Bitcoin release. Nobuaki Kobayashi, the trustee of the Mt. Gox estate sold 24,658 BTC (worth $260 million at the time) during a creditors’ meeting in 2018.
In 2022, Kobayashi revealed Mt Gox’s remaining assets, and also outlined a plan to pay out Mt. Gox’s investors. The creditors have to apply and file their claim to BTC, which will then be reviewed and reimbursed.
According to the latest announcement, Mt. Gox Assets are: 141,686 BTC, 142,846 Bitcoin Cash, and 69.7 billion Yen in cash.
Experts’ View
According to Rajagopal Menon, vice president, WazirX, Mt. Cox’s “massive BTC dump is a result of their efforts from 2021 to develop a civil rehabilitation plan with single payouts at fixed rates for creditors”.
“The plummeting value of the BTC was linked to the constant liquidation of Bitcoin in the short term by the company’s trustees in 2018. We may witness relief in markets post distribution, which is currently an amalgamation of fears of macro-level problems like war, and the strength of the dollar. The current market is expected to witness a spread-out supply load of Bitcoins, as distribution is set to take place over the coming months, as creditors register for early payouts,” he says.
“Most of the creditors are early investors of Bitcoin, privy to the life-changing effects of long-term investing in BTC, and there could be resistance from such investors to register for early payments,” he adds.
Matthew Graham, CEO at Sino Global Capital, a VC Firm says: “We are talking a lot of reimbursement in fiat and minority reimbursement in Bitcoin. If it’s (reimbursement), it is 70 per cent cash and 30 per cent Bitcoin.”
He adds: “You have to remember the characteristics of the people in crypto of that special period in time – 2012, 2013, 2014, and the early years. These were the die-hard true believers. If most of the money is coming in fiat, you might even see the reverse, some of the fiat being used to purchase Bitcoin.”
Vikram Subburaj, CEO at Giottus Crypto Platform, said that the Mt. Gox recovery has been well-anticipated, and it provides relief to the customers who lost their Bitcoins in the 2014 heist.
“It is noteworthy that on a daily basis, nearly 1.5 million Bitcoins get traded on exchanges (by volume). There will likely be some selling, given that the heist happened when BTC was trading below $500, but that should only impact prices for the short-term (maybe a week). Also, certain institutions have bought some claims from customers, who may not be in a hurry to sell moderating the overall impact. We believe that macroeconomic conditions will continue to have a larger impact on BTC and its prices than the Mt. Gox recovery. As of now, this has sparked some fears of mass dumping,” Subburaj adds.
