TL;DR
- Galaxy Digital Analysis: Alex Thorn of Galaxy Digital predicts a lower impact on Bitcoin sell-off from Mt. Gox distributions, with many creditors likely to hold rather than sell their Bitcoin and Bitcoin Cash.
- Creditor Behavior: Approximately 75% of creditors have chosen an “early payout” option, and past behavior suggests they may continue to hold onto their assets despite the upcoming distribution of 95,000 BTC.
- Market Absorption: The Bitcoin market is expected to absorb the potential sell-off without major disruption, and Bitcoin Cash may face more volatility due to its lower liquidity compared to Bitcoin.
In a recent analysis shared by Alex Thorn, the head of research at Galaxy Digital, the Bitcoin market may experience less sell pressure than initially feared due to the resolution of the Mt. Gox bankruptcy case.
creditors have been stuck in mt gox bankruptcy for 10+ yrs–finally trustee says in-kind distribution of #BTC #BCH will begin in july. we think fewer coins will be distributed than people think & that it will cause less #bitcoin sell pressure than market expects
here's why 👇
— Alex Thorn (@intangiblecoins) June 24, 2024
After a decade-long legal battle, distributions of Bitcoin (BTC) and Bitcoin Cash (BCH) to creditors are set to begin in July, marking the end of one of the most significant losses in cryptocurrency history.
Back in its prime, Mt. Gox reigned as the leading cryptocurrency exchange, overseeing a staggering 70% of all Bitcoin transactions. However, the year 2014 brought forth a shocking revelation from the exchange.
It came to light that a massive sum of approximately 940,000 BTC, valued at around $424 million back then, had mysteriously vanished from its secure vaults.
This revelation led to Mt. Gox’s bankruptcy and a protracted effort to recover the lost assets. Over the years, 141,868 BTC were eventually recovered, now valued at approximately $9 billion due to Bitcoin’s price surge.
Galaxy Digital Analyst’s Insights
Alex Thorn’s analysis draws from bankruptcy filings and discussions with the involved creditors. Despite the substantial initial loss, the recovery process has yielded a remarkable return for creditors—a 140-fold increase in dollar terms based on current valuations.
Thorn emphasizes the attractive “early payout” alternative for creditors, offering a 10% reduction. It’s fascinating to note that around 75% of creditors have opted for this option, most likely due to the lengthy legal proceedings.
Roughly 95,000 BTC are still set to be distributed early. Out of this total, 20,000 BTC have been set aside for claims funds, while 10,000 BTC are earmarked for addressing the Bitcoinica bankruptcy. As a result, individual creditors now have access to around 65,000 BTC/BCH.
Cautious Creditors
Thorn predicts that most individual creditors, many of whom are long-time Bitcoin enthusiasts and early adopters, will hold onto their shares rather than sell. Their past behavior—resisting “compelling & aggressive offers” from claims funds—indicates their likely intentions.
Additionally, the significant capital gains impact of selling could discourage immediate liquidation. Even if a small percentage (10%) of the 65,000 BTC were sold, it would only introduce around 6,500 BTC into the market.
This figure is lower than some speculators feared. Thorn believes that major exchanges like Kraken and Bitstamp can absorb these transactions without significant disruption, given Bitcoin’s robust liquidity.
Bitcoin Cash Challenges
Bitcoin Cash (BCH), acquired through the BTC fork in 2017 rather than being initially owned by creditors, encounters its own set of distinctive hurdles. Due to its lower liquidity and market depth in comparison to Bitcoin, BCH is more prone to experiencing fluctuations and volatility.
Thorn highlights the fact that BCH possesses a mere $400,000 in liquidity on order books, which is within a 1% range of the current market price. This could potentially intensify price fluctuations as creditors initiate their selling activities.
Monitoring the Impact
Thorn recommends that stakeholders closely monitor transaction movements, especially through platforms like Arkham Intelligence, to track the real-time impact of Mt. Gox distributions. As of now, BTC is trading slightly above the $61,000 mark.
