The trustee of Mt. Gox, the Japanese Bitcoin Stock exchange that went bankrupt a decade ago, on Friday said The company has begun making payments to a few of its creditors in Bitcoin and Bitcoin Cash.
The announcement further stated that repayments to other users of the hacked exchange can be “prompt” in the event that they met certain conditions, including account verification and registration with considered one of the designated digital asset exchanges through which the bankruptcy estate allows withdrawals in digital tokens.
“We ask the eligible restructuring creditors to be patient,” the statement continues.
The Bitcoin price has fallen by almost 6% within the last 24 hours.
Customers of the Tokyo-based stock exchange have been waiting for 10 years for his or her money to be repaid.
What is Mt. Gox?
Mt. Gox, once considered one of the world's largest cryptocurrency exchanges, filed for bankruptcy in February 2014 after a series of robberies resulted in as much as 950,000 bitcoins – now price over $58 billion – disappearing.
Mt. Gox blamed a bug within the cryptocurrency's framework for the disappearance of the bitcoins. While users received messages about incomplete transactions when accessing the exchange, the coins may very well have been illegally withdrawn from their accounts by hackers, Mt. Gox said.
After the bankruptcy declaration, 140,000 of the missing bitcoins were recovered, meaning that around $9 billion price of bitcoins (at today's rates) will likely be returned to their owners. At the time of the bankruptcy, one bitcoin was trading for around $600. Today, it’s price greater than $54,000 – a rise of just about 9,000%.
According to data from Arkham Intelligence, Mt. Gox moved billions of dollars price of bitcoins from its crypto wallets on Thursday and Friday ahead of the repayment memorandum.
More than 47,000 bitcoins price $2.7 billion were withdrawn from an offline Mt. Gox cryptocurrency wallet, Arkham Intelligence said Friday.
Some of the funds, valued at $84.9 million, were transferred to Japanese crypto exchange Bitbank, which Arkham Intelligence said is among the many platforms supporting refunds to Mt. Gox users. Another $63.6 million in Bitcoin was transferred to an unknown counterparty, which Arkham Intelligence said was “likely a publicly traded refund exchange.”
According to Arkham Intelligence, Mt. Gox wallets still hold 138,985 bitcoins, price around $7.5 billion at current rates, meaning billions of dollars of the cryptocurrency have yet to be paid out.
What impact will this have on Bitcoin?
Analysts previously told CNBC that they expect Mt. Gox's repayment plan to steer to heavy selling in Bitcoin, but that it will likely be short-lived and precede further price increases later this yr and into early 2025.
John Glover, chief investment officer of crypto lending firm Ledn, told CNBC that the windfall for Mt. Gox users would likely lead to very large Bitcoin sales as investors looked to lock of their profits.
“Many will clearly monetize their assets and rejoice that their fortune in the collapse of Mt. Gox was the best investment they ever made,” said Glover, who previously served as a managing director at Barclays. “Some will clearly choose to take the money and walk away,” he wrote in an emailed comment.
JPMorgan analysts said in a note last month that they expect Mt. Gox customers to sell a few of their bitcoins to cash in on the cryptocurrency's huge price increases.
“Assuming a lot of the Mt. Gox creditor liquidations happen in July, [this] creates a pattern where crypto prices come under … pressure in July but recuperate from August onwards,” they wrote.
Ultimately, the total amount owed to creditors – about 140,000 bitcoins – represents about 0.7 percent of the total 19.7 million bitcoins currently in circulation.
This means, analysts say, that despite the likely price impact, there is sufficient liquidity to cushion the impact of a severe sell-off.
James Butterfill, head of research at CoinShares, told CNBC that the billions of dollars of bitcoin traded daily on trusted exchanges this year suggests that “there may be enough liquidity to soak up these sales in the course of the summer months.”
Jacob Joseph, research analyst at CCData, echoed this view, saying the markets were more than capable of absorbing the selling pressure.
“In addition, a big portion of creditors will likely accept a ten percent discount on their holdings to receive early repayment, and never all holdings will likely be liquidated on the open market, reducing overall selling pressure,” he told CNBC by email.
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