The recent movement of Bitcoin from the infamous Mt. Gox exchange wallet sent shivers down the spines of investors. But fear not, it was just a preparation for the upcoming distribution to creditors, assured former CEO Mark Karpelès and the Mt. Gox estate.
This upcoming distribution, however, is a double-edged sword. While it brings long-awaited closure for creditors owed billions, it also raises concerns of a potential market glut. Research firm K33 highlights this risk, suggesting the influx of Bitcoin could put downward pressure on prices.
The Mt. Gox situation is unique compared to recent crypto bankruptcies. Its age (a decade old) and the complexities surrounding missing coins and overseas legalities create a shroud of uncertainty.
This uncertainty is amplified by the upcoming distribution. Earlier this year, creditors received emails confirming their details and hinting at “in-kind” distributions, meaning they’d receive Bitcoin or Bitcoin Cash, not fiat currency. This aligns with the partial yen repayments late last year.
While some fear a Bitcoin bloodbath, Galaxy Research’s Alex Thorn offers a more nuanced perspective. Creditors have options for payouts, with some opting for earlier distributions at a slightly reduced rate. Others might choose to wait for a larger payout later.
Thorn also believes the core creditor base consists of long-term (BTC)holders unlikely to sell immediately. He points to their decade-long wait and resistance to previous claims offers as evidence of their hodling resolve.
However, the sheer size of the payout can’t be ignored. Even a small portion of the distributed Bitcoin could impact the market. Galaxy acknowledges this but believes the market might be overreacting to the potential sell pressure.
While the impact on Bitcoin might be debatable, Bitcoin Cash (BCH) seems to be a different story. Both Thorn and K33 agree that the repayments could negatively affect BCH. Unlike Bitcoin, creditors never held BCH, as it was created after the Mt. Gox bankruptcy. This could lead to a significant sell-off as creditors receive their BCH.
Thorn acknowledges that some Bitcoiners have a “higher rate of BCH sympathy” than the broader market, potentially mitigating some of the selling pressure. However, K33 highlights the possibility of heavy shorting in BCH futures contracts, further amplifying the downward pressure. Galaxy even predicts that 90% of the distributed BCH could eventually be sold.
Also Read:Mt. Gox on the Move: $9.6 Billion Bitcoin Transfer Sparks Repayment Hopes and Security Concerns
While the impact on Bitcoin remains to be seen, Bitcoin Cash seems more vulnerable to price declines. The coming months will be crucial in determining how the market reacts to this historic distribution.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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