September 7, 2024
Mt. Gox repayment date looming: Is Bitcoin in trouble?

While the cryptocurrency community is actively discussing the upcoming 2024 Bitcoin halving, another potentially major market event is taking place this year.

The trustees of hacked Bitcoin (BTC) exchange Mt. Gox are expected to finally pay off the exchange’s creditors by the end of October 2023. Some industry observers believe that if this happens, the cryptocurrency market could be significantly affected in several ways.

Founded in 2010, Mt. Gox was once the largest bitcoin exchange in the world, and it was estimated to complete about 70 percent of all bitcoin trades before it collapsed.

The now-defunct exchange lost 850,000 BTC, or 4 percent of all bitcoins in circulation, in a security breach in 2014. The incident made Mt. Gox one of the largest cryptocurrency bankruptcies ever, with creditors still unpaid nine years later.

With the current Mt. Gox repayment deadline expected in about three months, Cointelegraph has reached out to a number of cryptocurrency executives to find out what to expect from the expected Mt. Gox repayment.

What do investors do when they get their bitcoins back?

Jacob King, founder and CEO of WhaleWire, believes that the Mt. Gox repayment will be a unique event that will certainly have a significant impact on the market.

King told Cointelegraph that after losing all of their bitcoins nearly 10 years ago, most creditors will likely end up selling at least some of their bitcoins after eventually recovering some of them.

“The influx of sell orders could put downward pressure on prices and could lead to a downturn in the market,” he said. King also mentioned that multiple lengthy delays in the Mt. Gox repayment process had caused “disillusionment among investors , weakening their confidence in the market.”

The CEO of WhaleWire continued:

“It’s a simple question, what are investors going to do? Last year, we saw more selling than buying, and many of those who failed at Mt. Gox have turned to cryptocurrencies. The chances of this being maintained for a few years are slim to none.”

By some of Mt. Gox’s creditors themselves, there could be some selling pressure in the bitcoin market once repayments are made. However, as a trader who identified himself as a creditor of Mt. Gox told Cointelegraph, many claimants may continue to hold. He said:

“When we get the tokens, I think we’re all going to hold them. But when word spreads around the world that these coins are going to be released, people who own the coins but aren’t claimants sell them because they’re worried about the price going down.”

How much will be repaid?

Mt. Gox expects to repay a total of more than 10,000 cryptocurrency creditors from around the world by the end of October. Although the exchange lost 850,000 BTC, Mt. Gox will only repay some of the losses caused by the hack, as the company can only recover part of the funds.

according to According to online reports, Mt. Gox will repay its creditors 142,000 BTC ($4.3 billion) and 143,000 forked cryptocurrency Bitcoin Cash (BCH), worth about $40 million. The bankrupt exchange will also reportedly pay 69 billion yen ($510 million). Payments will be made using a combination of fiat and cryptocurrencies, with each payment coordinated individually with each investor.

Whale Alert co-founder Frank Weert agreed that the repayment of Mt. Gox funds would be a big deal. But the executive told Cointelegraph that how it affects the market will largely depend on how the funds are distributed and how they are reported in the media.

“We’re sure some people will be happy to finally be able to cash out, but we doubt it will lead to a massive sell-off,” he said. Asked if something similar had ever happened in the crypto industry, Welter said it hadn’t happened so far event of this magnitude.

Some of the major creditors, including Bitcoinica and MtGox Investment Funds, reportedly chosen Bankruptcy recovery funds paid in Bitcoin.

According to the Mt.Gox balance bot on Twitter, as of this writing, Mt.Gox trustees hold 135,890 BTC across all known addresses.

Mt. Gox Bitcoin Repayment Amount Close to Michael Saylor’s BTC Holdings

While many cryptocurrency enthusiasts believe the Mt. Gox payback will be a major event, some skeptics believe any potential fallout could fade quickly.

The amount of bitcoins that will be returned to Mt. Gox creditors is comparable to the holdings of bitcoin advocate Michael Saylor, who holds at least 152,333 bitcoins ($4.52 billion).

“It doesn’t look like much anyway,” Quantum Economics founder Marty Greenspan told Cointelegraph. Referring to the current value of Bitcoin that needs to be repaid, Greenspan emphasized that the current daily on-chain transaction volume is much higher.

related: $30 Billion Stolen from Cryptocurrency Ecosystem Since 2012: Report

“Daily on-chain transaction volume averages $12 billion, with reported volume around $18 billion per day,” he noted, adding:

“So it’s definitely something that the market can absorb in a relatively short period of time. I think there might be some selling pressure because of the speculation surrounding this event. A lot of people don’t understand the basic math.”

Greenspan also emphasized that Mt. Gox’s bitcoins will be distributed to many people, which is a very good “mass distribution event” for the network.

“There’s a lot of OGs that are going to be reactivated. Some of them are going to sell their hands and wash their hands, but I bet a lot of them are going to be big advocates of self-custody,” he added.

The executive also expressed optimism about a potential payback, saying that FUD related to Mt. Gox has “stricken the market” for years and “it’s great to see it finally resolved.”

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