Mt. Gox Bitcoin Repayments Less Daunting, Says CoinShares

On Jul 4, 2024

CoinShares has released a comprehensive report to invalidate the argument that the Mt. Gox repayment in July would affect the Bitcoin price.

However, the report points out that Bitcoin Cash may suffer for two reasons.

The infamous Japanese crypto exchange, Mt. Gox is officially set to reward creditors with repayment after suffering a brutal hack in 2011 and collapsing into bankruptcy. However, market insiders declare their concerns as fear of impact on the Bitcoin price escalates.

Digital asset management firm CoinShares has released a comprehensive report investigating the potential impact on the already dwindling broad market price.

The Reality on the Ground

According to the report, the Japanese trustee acting on behalf of the exchange, Nobuaki Kobayashi, holds around 142,000 Bitcoin (BTC) and the same amount in Bitcoin Cash (BCH). According to records, this amount of Bitcoin was worth $75 million when Mt. Gox was shutting down. Currently, the value has skyrocketed to $8.85 billion, with Bitcoin Cash also valued at $55,250,000.

At the time of the repayment announcement, creditors were given the option to select between a full cash repayment and full repayment in kind. The latter suggests that creditors get back Bitcoins instead of cash plus cash. In the CoinShares report, most creditors received the rest of their assets in Bitcoin or Bitcoin Cash. Also, all creditors have or will receive some amounts in cash.

As reported by Crypto News Flash earlier, the in-kind repayment was scheduled to begin this month (July). Fascinatingly, the potential impact on the Bitcoin price has forced sellers to exit their positions or liquidate their assets. This is evident in the ongoing broad market bloodbath, which has seen BTC fall by 15% in the last 30 days to trade at $58k.

Bitcoin Market Can Cope With the Selling Pressure; Bitcoin Cash Cannot

According to the CoinShares report, plenty of data suggests that the Mt. Gox overhang may not be as brutal as expected. The reason indicated stems from the fact that only 75% of creditors took a deal to take an early lump sum of around 90% of the owed amount (in kind). The rest agreed to wait till the end of the civil litigation, which could take a long time to resolve. This implies that the supply to be distributed this month has dropped to 95,000 Bitcoin. It is also known that 20% of the claims are owed to Bitcoinica and MtGox Investment Funds (“MGIF”), which also agreed to a 10% discount on their claims. Specifically, 10,000 BTC is owed to Bitcoinica, and 20,000 BTC is owed to MGIF.

According to the report, MGIF has publicly stated that it has no plans to sell its BTC holdings. This implies that the 95,000 Bitcoins have been reduced to 75,000 BTC. Exempting Botanica, 65,000 BTC are reportedly owed to individuals.

Interestingly, the distribution would occur on different exchanges at different dates within the month, reducing the possibility of a large concurrent selling. The average daily exchange inflow is 32,000 Bitcoin with records that 100,000 Bitcoin have been sent to exchanges on multiple occasions. On the day of the spot Bitcoin Exchange-Traded Funds (ETFs) launch on January 11, just under 150,000 Bitcoin daily inflow was recorded.

According to CoinShares, the number of large inflows recorded in the past implies that the market could easily cope with the large volumes if all of these assets were sold in a day. Per the report, liquidations from Grayscale ETF this year have already tested this.

CoinShares believes that Bitcoin Cash would suffer because it is a much less liquid asset and not nearly as liked by investors.