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Mt. Gox Starts Reimbursing Bitcoin to Creditors; Can It Curb Current Bullish Sentiment?
Nobuaki Kobayashi, the trustee overseeing the Mt. Gox bankruptcy case, announced Tuesday that the company has made payments in Bitcoin and Bitcoin Cash to some of its creditors. The trustee of Mt. Gox, the Japanese Bitcoin exchange that collapsed in bankruptcy a decade ago, began making the payments on July 5, 2024.
Refunds, which are made in Bitcoin (BTC) and Bitcoin Cash (BCH), are facilitated through designated cryptocurrency exchanges.
“The Rehabilitation Trustee has made refunds in Bitcoin and Bitcoin Cash to over 13,000 Rehabilitation Creditors to date,” the Mt. Gox Trustee said in a declaration.
The announcement also mentioned that payments to other creditors would be “made in a timely manner” once several conditions were met, including the validity of registered accounts, ensuring that repayments could be made in a safe and secure manner.
Ryan LeeChief Analyst at Bitget Search, has raised concerns about the potential market implications of this large-scale redemption. According to Lee, the sudden influx of Bitcoin into the market could trigger a supply shock, potentially leading to a substantial decline in Bitcoin prices.
“If a large amount of Bitcoin is unlocked and distributed to creditors in a short period of time, these Bitcoins could be sold immediately, leading to a significant increase in supply in the market. Such a supply shock could lead to a substantial decrease in Bitcoin prices, with retail investors more likely to sell,” Lee explained.
The scenario Lee describes is one in which retail investors, who may be more inclined to liquidate their holdings quickly, contribute to a liquidity drain, especially on exchanges with shallow market depth. This could exacerbate price volatility, creating a difficult environment for Bitcoin price stability. “If a large amount of Bitcoin held by retail investors is sold at a single point in time, it could lead to a liquidity drain, further exacerbating price volatility,” Lee noted.
However, Lee also highlighted a contrasting scenario where large holders, or “whales,” may choose to manage their assets differently. “The release of a large amount of Bitcoin could be concentrated among a few large holders who may have greater influence on the market. Therefore, this portion of the selling is more likely to be conducted over-the-counter (OTC). Alternatively, if market sentiment improves, these large holders may be more optimistic about the future market and continue to hold, thus not causing a significant impact on the market,” he added.
Lee compared the current situation to the German government’s recent planned sale, suggesting that Mt. Gox refunds could have a more pronounced effect on the market. “Compared to the German government’s planned sale, the amount refunded by Mt. Gox is larger, resulting in higher returns for users. Mt. Gox owes approximately 127,000 creditors over $9.1 billion in Bitcoin. These creditors have been waiting over a decade to recover their funds since the exchange collapsed in 2014 due to multiple undetected hacking incidents,” he said.
Bitcoin has shown signs of recovery since July 8, 2024, recovering almost all of the losses suffered earlier in the month and claim the $65,000+ level after 27 days. Bitcoin has historically often bounced strongly in July, posting an average gain of 7.42% after a downtrend in June. This recovery could be attributed to the start of Mt. Gox repayments to creditors.
The potential impacts on Bitcoin’s price and market dynamics will largely depend on how these lenders choose to manage their new assets.
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