Following a decade of bankruptcy, the Tokyo-based bitcoin exchange, Mt. Gox, is set to return nearly $9 billion worth of bitcoin BTC/USD to its users, sparking concerns among investors.
What Happened: Mt. Gox, which filed for bankruptcy in 2014 after a series of hacks, will commence the payout process in early July, CNBC reported on Monday. The court-appointed trustee supervising the bankruptcy proceedings confirmed that the disbursements, a combination of bitcoin and bitcoin cash, will be made to about 20,000 creditors.
While the announcement brings relief to the hack victims, it has also caused a dip in bitcoin prices. The cryptocurrency fell to $59,000 last week, marking the second-worst weekly decline of the year.
Analysts forecast that the return of approximately 141,000 bitcoins, or about 0.7% of the total bitcoins in circulation, could trigger significant sales as investors seek to secure gains. John Glover, CIO of crypto lending firm Ledn, suggested that many Mt. Gox users will likely cash out.
"Some will clearly choose to take the money and run," he added.
JPMorgan analysts highlighted that while Mt.Cox’s release of bitcoins would bring pressure on crypto prices in July, the situation is likely to rebound in August.
James Butterfill, head of research at CoinShares, voiced similar concerns, stating that the announcement of the Trust beginning to sell in July has understandably worried investors who are bullish about Bitcoin. However, he suggested there is enough market liquidity to cushion the blow of any possible mass-market sell action.
Lennix Lai, chief commercial officer of crypto exchange OKX, assured that sell-off concerns would be shortlived.
"Many of Mt. Gox's early users as well as creditors are long-term bitcoin enthusiasts who are less likely to sell all of their bitcoin immediately," he added.
Alex Thorn, a crypto analyst at Galaxy Research, predicted that only about 64,000 Bitcoin out of the total 142,000 BTC will be distributed to individual creditors, with much of that unlikely to be immediately sold. He suggested that the market impact could be minimal as many Mt. Gox creditors are likely long-term Bitcoin holders who have resisted selling their claims for years.
Why It Matters: The announcement of the repayments was first made last week when trustee Nobuaki Kobayashi confirmed the news in a statement. This led to a drop in Bitcoin prices from over $62,300 to about $60,500 in early Asian trading hours. This repayment has been long-awaited, following years of delays.
Mt. Gox was a major cryptocurrency exchange that suffered a massive hack in 2014, losing approximately 740,000 Bitcoin. Trustees have been working on a repayment plan for years, with a deadline set for October 2024 by a Tokyo court.
This incident was the largest among several attacks on the exchange between 2010 and 2013.
Trustees have been working on a repayment plan for several years, with a deadline set for October 2024 by a Tokyo court.
Image via Shutterstock
This story was generated using Benzinga Neuro and edited by Pooja Rajkumari
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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