Mt. Gox Begins $8.5B Bitcoin Repayments in July – Will BTC Go Down?

• Mt. Gox will start repaying the victims of the 2014 hack in July 2024, more than a decade after the attack. The reimbursement will range between 65,000 and 140,000 $BTC, worth a total of approximately $8.5B.
• Bitcoin fell below $61,000 with this news, and it still hasn't recovered. Crypto investors fear a market dump if the Mt. Gox victims sell their assets en masse.
• Creditors will not receive any Ethereum in the repayment package, which means $ETH will be less affected by a potential selling pressure surrounding Bitcoin.

Mt. Gox ceased operations in February 2014 after hundreds of thousands of Bitcoins were stolen from the company's hot wallet.

Following ten years of legal proceedings, Mt. Gox will start repaying the 2014 hack victims in July 2024. The former exchange will send approximately $8.5B Bitcoins to creditors, which is worrying investors.

Opinions are dividedon whether this will be bad or neutral for Bitcoin's price, depending on whether creditors will sell their assets or HODL.

The repayments will be made only in Bitcoin, with no Ethereum. Despite this, $ETH holders remain worried about a potential price dump in July.

Below we discuss the Mt. Gox situation and see if the crypto market is in for tough times next month.

Mt. Gox Refresh - What Happened to the Exchange?

Launched in 2010, Mt. Gox was a Bitcoin exchange that handled 70%+ of the world's Bitcoin transactions by 2014. It ceased operations in that same year when over 850,000 Bitcoins were reported lost.

The exchange filed for bankruptcy on February 28, 2014, reporting $65M in liabilities and multiple lawsuits from creditors.

In March 2014, Mt. Gox claimed it found 199,999.99 Bitcoins (worth ~$116M), with the remaining 650,000 Bitcoins still unaccounted for.

Between several foul play allegations, the CEO getting arrested, and the Civil Rehabilitation Plan being accepted by creditors (compensation in Bitcoin for the losses), the situation screeched to a halt until now.

The repayment announcement mentions the creditors will receive Bitcoin and Bitcoin Cash starting in July 2024.

With no Ethereum repayments, $ETH holders have one less reason to worry about, though a potential Bitcoin sell-off might still impact Ethereum nonetheless.

Will the Mt. Gox Creditors Destabilize the Bitcoin Market?

While good news for the Mt. Gox victims, the repayment news has sparked controversy among crypto investors, especially Bitcoin holders.

Many fear a market-wide Bitcoin sell-off that will impact $BTC ETFs, which have amassed over $14.3B in net inflows so far.

That's like over half of all the ETF inflows being negated in one shot.Eric Balchunas, Senior ETF analyst at Bloomberg Intelligence

Bitcoin has increased by 10,390% between February 2014 and June 2024, from ~$579.7 to $60,816. A $3,500 investment then would be worth over $360,000 today.

It wouldn't be a surprise if creditors choose to sell and capitalize on their gains, especially after waiting for over ten years to recoup their losses. If not them, the firms who bought the claims over the years might.

Conversely, others believe the claimants (those who haven't sold their claims) are long-term bullish and won't sell their $BTC positions.

Mt Gox creditors in need of funds (i.e. weak hands) have had ~10 years to sell their claims

There are no distressed/urgent sellers left

- Alistair Milne (@alistairmilne) June 24, 2024

1. Claim buyers may sell the $BTC to make a profit on a so-far blocked investment.
2. Other market participants might sell their $BTC to avoid the assumed crash, creating selling pressure and volatile market conditions.

Speaking of crypto volatility, the S&P 500 has been going down for the past week, while the FED is talking about cutting interest rates, indicating a period of market softness might lie ahead.

This combo cut Bitcoin's bullish run short after reaching a $73K ATH in March. The upcoming Mt. Gox repayment may further add to the volatility, potentially leading to more selling pressure and FUD.

Can Non-Custodial Exchanges Prevent Mt. Gox Repeats?The Mt. Gox fiasco wasn't a one-time event.

Other exchange scams like OneCoin, BitConnect, and Bitclub Network (totalling over $29.722B) further eroded investors' trust in centralized (custodial) exchanges.

Non-custodial exchanges (DEXs) like Uniswap would mitigate the risk of rug pulls and institutional scams stealing investor money.

The old adagenot your keys, not your coins' still rings true but DEXs also have several downsides:

• Less convenient to use
• Less liquidity
• Less popular
• More expensive, as the trades happen on the blockchain

The good news is centralized exchanges are already starting to improve on safety and transparency, with Binance and Kraken publishing cryptographically verifiable proof of reserves.

It's a move in the right direction, but it might be insufficient to offset the FUD caused by so many centralized exchanges going rogue.

The Verdict - We Might See Bitcoin Volatility in July

Our educated guess is that FUD, combined with the claim buyers' possible $BTC liquidation might lead to market volatility.

While a crash is unlikely, we could see a bigger correction below $60K. However,we recommend you DYOR and decide for yourself, as macroeconomic factors often change the market conditions.

References

• Mt. Gox Repayment Announcement (Mt. Gox)
• X Post About the Mt. Gox Repayment (X)
• Bitcoin ETF Flow - All Data (Farside)
• S&P 500 Performance Overview (Market Watch)
• Proof of Reserves Explained (CoinDesk)

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