(Kitco News) – Bitcoin (BTC) has struggled to regain the bullish momentum witnessed in the first quarter of 2024 as flows into spot BTC exchange-traded funds (ETFs) have started to reverse; matters appear set to get worse before they get better as an influx of more than 140,000 Bitcoins into the market could see the recent sell-off intensify.
According to a note released by the trustee overseeing the Mt. Gox bankruptcy, the exchange will begin the process of issuing repayments in Bitcoin and Bitcoin Cash to creditors starting in July, which some analysts have pointed to as the primary source of weakness for BTC Monday.
“The Rehabilitation Trustee will commence the repayments in Bitcoin and Bitcoin Cash in due course to the cryptocurrency exchanges with which the Rehabilitation Trustee has completed the exchange and confirmation of the required information for implementing the repayments,” the note from rehabilitation trustee Nobuaki Kobayashi said. “The repayments will be made from the beginning of July 2024.”
Kobayashi noted that Mt. Gox has spent extra time and due diligence “to ensure safe and reliable repayment to creditors, including technical remedies for safe repayments, compliance with financial regulations in each country, and discussion of repayment arrangements with the cryptocurrency exchanges.”
He also reiterated his call for patience from creditors, saying that the pace of the payments will depend on the chosen method of repayment, which includes coordination with other cryptocurrency exchanges.
“We will commence the repayments in the order of the cryptocurrency exchanges with which the Rehabilitation Trustee will complete the exchange and confirmation of the required information,” he said. “Please wait for a while until the repayments are made.”
Mt. Gox creditors, which include more than 127,000 accounts, have been waiting for ten years to recover their funds after multiple hacks led to more than 940,000 Bitcoins being stolen from the exchange in 2014. The exchange subsequently filed for bankruptcy, leaving investors' funds in limbo while the bankruptcy case worked its way through the legal system.
In May, the exchange caused a stir and temporary freak-out for Bitcoin investors when it transferred 141,686 BTC worth $9.62 billion into a new wallet, “1Jbez,” causing many in the ecosystem to warn that a massive market dump was imminent. This was the first on-chain movement of funds from cold wallets associated with Mt. Gox in more than five years.
Kobayashi was quick to release a statement saying that the transfers were part of a consolidation plan ahead of beginning repayments to creditors, which helped calm investors' nerves at the time.
“The Rehabilitation trustee is preparing to make repayment for the portion of cryptocurrency rehabilitation claims to which cryptocurrency is allocated,” the statement said. “As the Rehabilitation trustee is proceeding with the preparation for the above repayments, please wait for a while until the repayments are made.”
According to Alex Thorn, head of research at Galaxy Research, the anticipated sell-off from the Mt. Gox Bitcoins hitting the market is expected to be less than the FUD stories making headlines would suggest, as there are only 65,000 Bitcoins set to be distributed to individual investors.
“To get payout now (the "early" payout, lol), creditors took a ~10% haircut. We think ~75% of BTC chose this option, leaving ~95k coins for early pay,” Thorn tweeted. “Of that, ~20k coins are owed to claims funds [and] ~10k coins are owed to the Bitcoinica BK, leaving ~65k coins for [individual] creditors. That 65k BTC/BCH is much less than the 141,868 coins that are published by the press regularly.”
“So, I believe the number of coins being distributed is lower than the market expects (see all types of these headlines),” he concluded. “And I think BCH will perform worse on a relative basis than BTC once those coins are distributed – a much larger portion will be sold by creditors into a much less liquid market.”
Some analysts and early crypto investors who have been embroiled in Mt. Gox since it started have also warned that, despite the announcement from Mt. Gox’s rehabilitation trustee, repayments could still face further delays, as the exchange was originally set to begin repayments in October 2023 before a delay was announced for those plans in September 2023.
And crypto trader Pat showed that Mt. Gox-related FUD and pullbacks are nothing new for the crypto market as the past three times the story was in the headlines were followed by similar pullbacks, only for Bitcoin to ultimately head higher.
The past 3 times Mt.Gox repayment 'fud' was dropped.
March 6 2023
Nov 22 2023
Jan 6 2024 pic.twitter.com/pEzjR2GPgN— Pat (@PattaTrades) June 24, 2024
