Markets
Mt.Gox’s $9 Billion Repayment Begins Today! How will the cryptocurrency market react?
Bitcoin just climbed back to $63,350, a 4% gain that pared some of June’s losses. But is this really a comeback? Probably not, as sentiment toward Bitcoin and broader crypto markets remains cautious.
An impending event threatens to throw the cryptocurrency market back into turmoil. What is it and will it sink Bitcoin or create a buying opportunity? Read on to find out.
Concerns About Mt. Gox Relocation
Investors fear a major liquidation event as now-defunct exchange Mt. Gox begins distributing recovered tokens this week.
Mt. Gox, a once-major cryptocurrency exchange that went bankrupt a decade ago following a major hack, will begin distributing Bitcoin Refunds to creditors this week. These creditors, who waited years to be compensated, are expected to receive around $9 billion worth of Bitcoin at current prices
It was a long struggle
In 2011, Mt. Gox lost approximately 950,000 bitcoins in a hack, a staggering amount considering Bitcoin’s record value at the time. $32 per BTCAbout 140,000 of these bitcoins were later recovered and are now worth around $9 billion, reflecting a massive increase in their value.
Between July and October, Mt. Gox creditors will receive 142,000 bitcoins, worth about $9 billion at current prices. Although there is a deadline in October, JPMorgan analysts estimate that most of the repayments will occur in July.
Prepare for market pressure!
JPMorgan analysts suggest that some Mt. Gox creditors may sell some of their Bitcoin claims this month, which could put initial pressure on cryptocurrency markets.
This expectation is supported by a slight decline in JPMorgan’s Bitcoin futures position indicator based on CME futures, indicating that it is primarily retail clients, not institutional investors, who have recently sold their crypto holdings.
What to expect next?
However, analysts expect the market to recover from August, partly due to upcoming cash repayments from another bankrupt crypto exchange, FTX.
FTX, another bankrupt cryptocurrency exchange, will also pay off its creditors in the coming months, but those repayments will be in cash. Estimated at between $14 billion and $16 billion, these repayments are expected shortly after the final approval of FTX’s liquidation plan on October 7.
These funds could potentially support crypto markets as crypto-native creditors could reinvest their repayments into digital assets.
Will the Mt. Gox redemption trigger a sell-off in cryptocurrencies, or is this a buying opportunity? Share your thoughts.