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Mt. Gox, once the world’s largest bitcoin exchange, has started repaying its creditors in bitcoin and bitcoin cash, marking the beginning of a long-awaited recovery process. The Tokyo-based exchange filed for bankruptcy in February 2014 after losing approximately 950,000 bitcoin, worth around $58 billion at today’s prices, due to hacking incidents.
Key Points:
- Repayment Process: The trustee announced that repayments will be made to creditors who have completed account verification and subscribed to designated digital asset exchanges. The process will continue as more creditors meet the conditions.
- Bitcoin Movements: Recently, Mt. Gox transferred significant amounts of bitcoin, including 47,000 bitcoins worth $2.7 billion, from its wallets. Some of these funds were sent to Japanese exchange Bitbank, while others went to an unidentified counterparty.
- Current Holdings: Mt. Gox still holds 138,985 bitcoins, worth around $7.5 billion at current prices. The total amount to be distributed is substantial, with significant amounts remaining to be repaid.
Market Impact:
- Potential Sell-Off: Analysts anticipate that the repayment process could lead to heavy selling pressure on bitcoin as creditors cash out to realize gains. The expected sell-off could impact bitcoin prices temporarily.
- Short-Term Pressure and Long-Term Outlook: Analysts predict that the selling pressure might cause a short-term dip in bitcoin prices, particularly in July. However, they expect a rebound starting in August, as the market absorbs the selling pressure. JPMorgan analysts have highlighted this pattern in their forecasts.
- Liquidity and Market Resilience: The total amount owed to creditors—140,000 bitcoins—represents about 0.7% of the total 19.7 million bitcoins in circulation. Experts believe the market has sufficient liquidity to absorb the impact of these sales. Some creditors may accept a discount to receive their repayments early, which could help mitigate the overall selling pressure.
The initiation of repayments by Mt. Gox marks a significant event for the cryptocurrency market. While the immediate effect might be a decline in bitcoin prices due to increased selling, analysts suggest that the market is well-positioned to handle the pressure, with a potential recovery in the near future.