Analyst predicts less market turmoil than initially feared as Mt. Gox begins repayments to creditors in July 2024. This development is pivotal for the cryptocurrency market, which recently saw significant volatility.
Once a leading Bitcoin exchange, Mt. Gox faced bankruptcy in 2014, leaving thousands of creditors in limbo.
Analyst Estimates That Mt. Gox Creditors Will Sell Only 6,500 BTC
As the trustee announced the commencement of repayments, the market responded with a sharp drop in Bitcoin prices, plunging to $58,500. Bitcoin visited this level for the first time after May 3. However, the price quickly rebounded to above $61,300, showcasing the resilience of the crypto market.
Despite the initial panic that triggered over $360 million in liquidations within 24 hours and continued outflows from Bitcoin ETFs, the anxiety seemed short-lived.
Read more: Top Crypto Bankruptcies: What You Need To Know
Alex Thorn, Galaxy’s head of research, offers an analysis that counters the prevailing market sentiment. According to Thorn, the actual impact of the Mt. Gox distribution on Bitcoin’s selling pressure might be overestimated.
“Creditors have been stuck in Mt Gox bankruptcy for 10+ yrs. Finally, Trustee says the in-kind distribution of Bitcoin and Bitcoin Cash will begin in July. We think fewer BTC will be distributed than people think and that it will cause less Bitcoin sell pressure than market expects,” Thorn explained.
He bases his assessment on comprehensive reviews of bankruptcy filings and discussions with creditors.
Historical data reveals that Mt. Gox lost approximately 940,000 BTC, recovering only 15% (141,868 BTC). These assets, initially valued at around $63.9 million, have now ballooned in value to about $9 billion due to Bitcoin’s price increase. Despite the substantial potential for profit, the conditions of the payout might encourage creditors to hold onto their assets rather than sell.
Thorn outlined several reasons why individual creditors might resist selling their newly acquired Bitcoin.
“Many of these creditors are long-term Bitcoiners, early adopters who are technologically adept and have previously rejected aggressive offers to liquidate their claims for cash,” he noted.
Additionally, the significant capital gains on these assets would mean hefty taxes for those opting to sell.
After deductions for early payouts, individual creditors will receive approximately 65,000 BTC. Moreover, even if a fraction, approximately 10%, of the 65,000 BTC distributed to individual creditors were to be sold, this would represent just 6,500 BTC entering the market. This is far less disruptive than market fears suggest.
Read more: Bitcoin (BTC) Price Prediction 2024/2025/2030
Most of these BTC are set to be deposited directly into accounts at crypto exchanges like Kraken and Bitstamp, where the infrastructure is already in place to handle such transactions seamlessly. Meanwhile, many others believe that reasons other than Mt. Gox’s redistribution panic have also contributed to Bitcoin’s dip.
“Bitcoin is the best alarm system in markets today. This price dump is probably less about Mt. Gox coins being sold and more about some liquidity crisis on the horizon that is metastasizing behind the scenes,” Marty Bent said.
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