Mt. Gox Begins Bitcoin Payouts to Creditors, the Market Impact Is Uncertain

The Bitcoin price experiences a 1.5% decline today, falling below the $68,000 mark, following a brief peak near $70,600 yesterday.

The price of Bitcoin dropped by 1.5% on Sunday, falling below the $68,000 mark after briefly reaching a high of $70,600 the previous day. This decline comes as Mt. Gox, the once-dominant bitcoin exchange that collapsed in 2014, has begun processing payouts to its long-awaiting creditors, according to multiple reports.

This release involves approximately 75,000 Bitcoins, currently valued at over $5.1 billion, sparking concerns about the potential impact on market liquidity and price stability.

Head of research at Galaxy, a leading firm in the cryptocurrency sector, Alex Thorn provided real-time updates via Twitter on the movements of Bitcoin related to the Mt. Gox payouts. Initially, Thorn reported the transfer of approximately 25,000 BTC.

“About 25K BTC from Mt. Gox has moved in the last hour, likely the beginning of distributions to creditors. […] I personally expect most BTC gets hodl’d, but I can’t say the same for the BCH,” Thorn commented, indicating a differentiated impact on Bitcoin versus Bitcoin Cash.

Shortly after, the movements escalated rapidly, with Thorn’s updates continuing: “16.5K BTC just moved, totaling 42.9K BTC so far tonight BTC) Another 32.1k BTC just moved. Total is now 75k BTC so far tonight ($5.1bn). All moved to the 1Jbez…APs6 address. Maybe a consolidation before moving to the creditor custodians (bitgo, kraken, bitstamp).”

The potential market impact of these large bitcoin movements has been a topic of much speculation. General partner at Castle Island VC, Matt Walsh, discussed the strategic purchases of Mt. Gox claims.

“Lot of SPV capital buying claims with the intent on hodling the BTC (in-kind distribution mechanism). Agree with your take on the B-cash. Still, my back of the napkin math still has about 65K BTC set to be delivered to individual creditors,” Walsh stated.

Responding to Walsh, Thorn pointed out the speculative nature of these estimates. “Several assumptions in that number though,” he noted, implying the difficulty in predicting exact market outcomes from these distributions.

The behavior of creditors receiving these payouts is also under scrutiny. X user Dickie Emerson argued against the assumption that most would hold onto their Bitcoin.

“No clue why you think most BTC gets held. These were forced hodlers. They will get a major payday that they would have likely not received had it never been locked (they would have sold by now).”

In defense of his earlier statement, Thorn elaborated on why some creditors might choose not to sell their bitcoins immediately.

“There are some reasons to believe they will hodl. Noteworthy long termers make up a lot of creditors. Getting a huge payday in dollar terms (cap gains) but also only a 15% recovery in BTC terms.”

Thorn also remarked that many creditors were offered to sell their claims and refused, signaling their intent to hodl these coins instead.

“And average individual creditor only getting back about 3.23 BTC. Would you dump 3 BTC now? Or hodl for higher? Lots of speculation here on my part no doubt. Even a small percentage of it selling could move the market also,” Thorn added.

Confirmation From On-Chain Analysis

Supporting the observations of large-scale movements, James “Checkmatey” Check, a highly regarded on-chain analyst, confirmed the unfolding events.

“Finally, Mt Gox distributions appear to be underway. Around 42.9k BTC on the move as we speak, worth around $2.94B. Congrats to the creditors, it must be a relief and a half to get these coins back. What a saga.”

Julio Moreno, head of research at CryptoQuant, also verified these transfers. “Outflows from Mt. Gox addresses continue: Now a total of 42,829 Bitcoin have moved out from Mt. Gox addresses in the last few hours. All coins have been transferred to a new address: 1JbezDVd9VsK9o1Ga9UqLydeuEvhKLAPs6.”

The recent developments mark a significant milestone in the long saga of Mt. Gox, which once handled 70% of all Bitcoin transactions before its collapse in 2014. The exchange’s downfall began when it halted withdrawals due to security breaches that led to the loss of approximately 800,000 bitcoins.

Following a protracted legal and administrative process, the recent movements suggest a closure is finally within sight for creditors, albeit introducing fresh variables into the volatile market.

At press time, BTC trades at $67,865.