Reimbursing Mt. Gox to Investors Could Dump Bitcoin and Reduce Value

Reimbursing Mt. Gox to Investors Could Dump Bitcoin and Reduce Value

Japanese crypto exchange Mt. Gox will pay 142,000 Bitcoin (BTC) to its creditors. These creditors saw their investments blocked when the exchange went bankrupt in 2014 following a hack, which resulted in the theft of approximately 850,000 Bitcoins.

In a letter sent in July, the trustee of the remaining Mt. Gox funds said it would begin paying creditors by the end of August.

The Mount Gox Saga

Mt. Gox was one of the biggest exchanges around in the early years of Bitcoin adoption. In February 2014, the exchange suffered a huge loss. The exchange suspended withdrawals in early February 2014, saying it discovered suspicious behavior in its digital wallets. Hundreds of thousands of Bitcoins have been lost through the exchange. The number of coins reported missing ranged from 650,000 to 850,000. At the end of the month, the company suspended withdrawals and halted trading, resulting in a 36% drop in the price of Bitcoin at the end of February, which was around $540 for one Bitcoin.

Local and international authorities were able to move around 200,000 Bitcoins, resulting in a destabilized market. Mt. Gox filed for bankruptcy with the Tokyo District Court and was later ordered into liquidation in April 2014. Afterwards, Mt. Gox’s assets were placed in an estate that included over 200,000 Bitcoin and Bitcoin Cash .

Some Bitcoins have already been sold before the next Bitcoin release. Nobuaki Kobayashi, the Mt. Gox estate trustee sold 24,658 BTC (worth $260 million at the time) at a meeting of creditors in 2018.

In 2022, Kobayashi revealed the remaining assets of Mt. Gox and also presented a plan to pay Mt. Gox investors. Creditors must apply and file their claim with BTC, which will then be reviewed and reimbursed.

According to the latest announcement, the assets of Mt. Gox are: 141,686 BTC, 142,846 Bitcoin Cash and 69.7 billion yen in cash.

Expert advice

According to Rajagopal Menon, VP of WazirX, “Mt. Cox’s massive BTC dump is the result of their efforts from 2021 to develop a civil rehabilitation plan with one-time fixed rate payments to creditors.”

“The plummeting value of BTC was linked to the constant short-term liquidation of Bitcoin by the company directors in 2018. We could see some relief in the markets after the distribution, which is currently an amalgamation of fears of problems at the macro level like war, and dollar strength. The current market is expected to see a staggering Bitcoin supply load as distribution is expected to take place over the next few months as creditors sign up for early payments,” he says.

“Most creditors are early investors in Bitcoin, aware of the life-altering effects of long-term investing in BTC, and those investors might be reluctant to sign up for early payments,” he adds.

Matthew Graham, CEO of Sino Global Capital, a venture capital firm, says, “We talk a lot about redemption in fiat and minority redemption in bitcoin. If it’s (refund), it’s 70% cash and 30% Bitcoin.

He adds, “You have to remember the characteristics of people in crypto from this special period in time – 2012, 2013, 2014 and the early years. They were the true die-hard believers. If most of the money comes in fiat, you might even see the reverse, with some of the fiat being used to buy Bitcoin.

Vikram Subburaj, CEO of Giottos Crypto Platform, said the recovery of Mt. Gox was well anticipated and came as a relief to customers who lost their Bitcoins in the 2014 heist.

“It should be noted that daily almost 1.5 million Bitcoins are traded on the exchanges (in volume). There will likely be some selling given that the heist occurred when BTC was trading below $500, but this should only impact prices in the short term (maybe a week). In addition, some institutions have purchased receivables from customers, who may not be in a rush to sell, which moderates the overall impact. We believe that macroeconomic conditions will continue to have a greater impact on BTC and its prices than the recovery of Mt. Gox. From now on, it has raised fears of massive dumping,” adds Subburaj.


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