Nobuaki Kobayashi, the trustee overseeing the Mt. Gox bankruptcy case, announced on Tuesday that the company has made payments in Bitcoin and Bitcoin Cash to some of its creditors. The trustee for Mt. Gox, the Japanese Bitcoin exchange that collapsed into bankruptcy a decade ago, began making payments on July 5, 2024.
The repayments, which are being made in Bitcoin (BTC) and Bitcoin Cash (BCH), are being facilitated through designated cryptocurrency exchanges.
‘The Rehabilitation Trustee has now made repayments in Bitcoin and Bitcoin Cash to over 13,000 rehabilitation creditors to date,’ the trustee for Mt. Gox said in a statement.
The announcement also mentioned that payments to other creditors would be ‘promptly made’ once they meet several conditions, including the validity of registered accounts, ensuring that repayments can be made safely and securely.
Ryan Lee, Chief Analyst at Bitget Research, has raised concerns about the potential market implications of this large-scale repayment. According to Lee, the sudden influx of Bitcoin into the market could trigger a supply shock, potentially leading to a substantial decrease in Bitcoin prices.
“If a large amount of Bitcoin is unlocked and distributed to creditors in a short period, these Bitcoins might be sold immediately, leading to a significant increase in supply on the market. Such a supply shock could result in a substantial decrease in Bitcoin prices, with retail investors more likely to sell off,” Lee explained.
The scenario Lee describes is one where retail investors, who might be more prone to liquidate their holdings quickly, contribute to a liquidity drain, especially on exchanges with shallow market depth. This could exacerbate price volatility, creating a challenging environment for Bitcoin’s price stability. “If a large quantity 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,” might opt to manage their assets differently. “The release of a large amount of Bitcoin might be concentrated among a few large holders who could have a stronger market influence. Therefore, this portion of sales is more likely to be conducted over-the-counter (OTC). Alternatively, if the market sentiment improves, these large holders might 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 sell-off project, suggesting that the Mt. Gox repayments could have a more pronounced effect on the market. “Compared to the German government’s sell-off project, the amount being repaid by Mt. Gox is larger, resulting in higher returns for users. Mt. Gox owes approximately 127,000 creditors over $9.1 billion worth of Bitcoin. These creditors have been waiting for over a decade to recover their funds since the exchange collapsed in 2014 due to multiple undetected hacking incidents,” he mentioned.
Bitcoin has shown signs of recovery since July 8, 2024, recovering nearly all of its losses from earlier in the month and reclaiming the $65,000+ level after 27 days. Historically, Bitcoin has often rebounded strongly in July, posting an average gain of 7.42% following a June downtrend. This recovery might be attributed to the commencement of Mt. Gox repayments to creditors.
The potential impacts on Bitcoin’s price and market dynamics will depend heavily on how these creditors choose to handle their newfound assets.
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