Mt. Gox, the Tokyo-based Bitcoin exchange that collapsed a decade ago after being hacked, is about to return billions of dollars worth of BTC to its users.
This impending event has many investors worried about the potential impact on the cryptocurrency market. In just a few days, Mt. Gox will start distributing nearly $9 billion worth of Bitcoin and Bitcoin Cash to around 20,000 creditors.
This marks the end of a long and complicated bankruptcy process filled with delays and legal battles since the exchange was hacked in 2014, losing between 650,000 and 950,000 bitcoins—worth nearly $60 billion at today’s prices.
Impact of the Mt. Gox payouts
This repayment news comes at a delicate time for Bitcoin.
Last week, the price of Bitcoin dropped to $59,000, marking the second-worst weekly decline in the crypto market this year. Historically, BTC’s price has been sensitive to large-scale redemptions from centralized trading platforms.
Just last month, Gemini, another crypto exchange, returned over $2 billion worth of Bitcoin to users whose funds were trapped in its Earn lending program.
This resulted in a 230% recovery after prices more than tripled since Gemini suspended Earn withdrawals on November 16. JPMorgan analysts noted in a recent research report that:
“It’s fair to assume that some of Gemini creditors, mostly retail customers, have taken at least partial profits in recent weeks.”
They anticipate a similar trend with Mt. Gox creditors, who might sell some of their Bitcoin to capitalize on the gains the cryptocurrency has seen.
“Assuming most of the liquidations by Mt. Gox creditors take place in July, [this] creates a trajectory where crypto prices come under further pressure in July, but start rebounding from August onwards.”
JPMorgan
In another instance last month, the German government sold 5,000 bitcoins—worth about $310 million—out of a 50,000-BTC stash seized in connection with the movie piracy operation Movi2k.
These funds were sent to various crypto exchanges, including Coinbase, Kraken, and Bitstamp, as reported by Arkham Intelligence. Analysts believe that these liquidations have also contributed to the downward pressure on Bitcoin’s price.
Heavy volatility expected for Bitcoin in July
The market is also watching other factors that could influence Bitcoin’s price. Data about economic activity in the second quarter of the year shows slowing momentum, leading to speculation that the Federal Reserve might cut interest rates later this year.
Until then, investors’ appetite for riskier assets like Bitcoin could fluctuate, affecting flows into ETFs.
Jag Kooner, Head of Derivatives at Bitfinex, pointed out that historically, Bitcoin has shown strength as equities weaken. The anticipated resumption of the bull market could amplify these flows.
“An important consideration is that a resumption of uptrend in crypto bull markets typically starts within 10-12 weeks from the halving, as we move into July and Q3, we get closer to that point with a very important bullish catalyst in the form of the Ethereum ETFs going live.”
Kooner
Real gross domestic product (GDP) increased at an annual rate of 1.4 percent in the first quarter, according to the third estimate released by the Bureau of Economic Analysis.
In the fourth quarter, real GDP increased by 3.4 percent. This slowdown suggests potential economic cooling, which could impact investor sentiment.
Jai Hamid
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