The trustee of the hacked Bitcoin exchange Mt. Gox is set to finally repay the exchange’s creditors by the end of October 2023. If that happens, the cryptocurrency market could be significantly affected in several ways, some industry observers agree.
Founded in 2010, Mt. Gox was once the biggest Bitcoin exchange in the world, estimated to facilitate around 70% of all BTC transactions before its implosion.
The now-defunct exchange lost 850,000 BTC — or 4% of all Bitcoin to ever be issued — in a security breach in 2014. The event made Mt. Gox one of the biggest cryptocurrency bankruptcies of all time, with creditors yet to be repaid, nine years later.
As the current Mt. Gox repayment deadline is scheduled to occur in roughly three months, Cointelegraph has reached out to some crypto executives to find out what to expect from the anticipated Mt. Gox repayment.
What will the investors do once they get their Bitcoin back?
The repayment of Mt. Gox will be a unique event, which is certain to have a significant impact on the market, WhaleWire founder and CEO Jacob King believes.
After losing all their Bitcoin almost 10 years ago, the majority of creditors are likely to sell at least a part of their BTC once they finally get it back, King told Cointelegraph.
“This influx of sell orders could create a downward pressure on prices and potentially lead to a market downturn,” he said. King also mentioned multiple prolonged delays in the Mt. Gox repayment process, which has already caused a sense of “disillusionment among investors, eroding their confidence in the market.”
The WhaleWire CEO continued:
“It’s a simple question of, what will the investors do? Over the last year, we’ve seen more sells than buys, and many of those who lost on Mt. Gox have moved on past crypto. The chances they hold for more years, after everything that happened, is highly unlikely.”
“We are sure some will be glad to be able to finally cash out, but we doubt it will cause a massive sell off,” he stated. When asked whether the crypto industry has ever seen a similar event, Weert said that there hasn’t ever been an event on such a scale so far.
Some of the Mt. Gox creditors themselves admit that the Bitcoin market may face some selling pressure once the repayment is done. However, many claimants are likely to continue to HODL, one trader who described himself as a Mt. Gox creditor told Cointelegraph. He stated:
“When we get our coins, I think we’re all going to hold. But when the news hits the world that these coins are going to be released, people who have coins but who are not the claimants, are going to sell for fear of the price going down.”
How much will be repaid?
Mt. Gox expects to repay a total of more than 10,000 crypto creditors from all over the world by the end of October. Despite the exchange losing 850,000 BTC, Mt. Gox will only repay part of the total losses from the hack because the firm was only able to recover some of the funds.
According to online reports, Mt. Gox will reimburse its creditors 142,000 BTC ($4.3 billion) and 143,000 in forked cryptocurrency Bitcoin Cash (BCH), worth roughly $40 million. The bankrupt exchange will also reportedly pay out 69 million Japanese Yen ($510 million). Payments will be made using a combination of fiat currency and cryptocurrencies, with each payout coordinated individually with each investor.
The repayment of Mt. Gox funds will be a massive event, Whale Alert co-founder Frank Weert agrees. But the way it influences the market will depend much on how the funds are released and how the media report it, the exec told Cointelegraph.
Some major creditors, including Bitcoinica and MtGox Investment Funds, reportedly chose to have their bankruptcy recovery funds paid out in Bitcoin.
According to data from the Mt. Gox balance bot on Twitter, the MtGox trustee holds 135,890 BTC on all known addresses at the time of writing.
Total current balance on all known addresses* of the MtGox Trustee: 135890.98002134 BTC.
— MtGoxBalanceBot (@MtGoxBalanceBot) July 11, 2023
Mt. Gox Bitcoin repayment amount is close to Michael Saylor’s BTC holdings
While many crypto enthusiasts believe that Mt. Gox repayment will be a massive event, there are also some skeptics who are confident that any potential effects are likely to subside quickly.
The amount of Bitcoin that is to be handed back to Mt. Gox creditors is comparable to the holdings of Bitcoin advocate Michael Saylor, who holds at least 152,333 BTC ($4.52 billion).
“Either way, it doesn’t seem like a lot,” Quantum Economics founder Mati Greenspan told Cointelegraph. Referring to the current worth of Bitcoin that is to be repaid, Greenspan emphasized that the current daily on-chain volumes are much bigger.
“Daily on-chain volumes are at an average of $12 billion, exchange volumes are reportedly in the neighborhood of $18 billion per day,” he noted, adding:
“So this is certainly something the market can absorb in a relatively short time frame. I would assume there may be some sell pressure due to the speculation around this event. Many people don’t know basic math.”
Greenspan also stressed that Mt. Gox’s Bitcoin will be distributed to lots of people, which could be very good for the network as a “mass-distribution event.”
“That’s a lot of OGs that will be reactivated. Some of them will sell and wash their hands but I bet many will be staunch advocates of self custody,” he added.
The exec also expressed optimism about the potential repayment, stating that Mt. Gox-related FUD has been “plaguing the market” for many years and it will be “good to see it finally put to bed.”