The Japanese trustee of Mt. Gox Bitcoin An exchange that went bankrupt 10 years ago said on Friday The company has begun making payments to some of its creditors in Bitcoin and Bitcoin Cash.
The announcement added that repayments to other users of the hacked exchange will be “expedited” provided they meet certain conditions, such as undergoing account verification and the bankruptcy estate joining one of the designated digital asset exchanges that facilitate payments in digital tokens.
“We ask eligible rehabilitation creditors to wait a little longer,” the statement continued.
Bitcoin prices have fallen by around 6% over the past 24 hours.
Customers of the Tokyo-based exchange have been waiting 10 years for their funds to be returned.
What is Mt.Gox?
Once the world’s largest cryptocurrency exchange, Mt. Gox filed for bankruptcy in February 2014 after a series of heists in which up to 950,000 bitcoins (worth more than $58 billion at today’s prices) were lost.
Mt. Gox claimed that the bitcoin disappearance was due to a bug in the cryptocurrency framework: users received incomplete transaction messages when they accessed the exchange, but in reality, hackers may have illegally moved coins from user accounts, Mt. Gox said.
After the bankruptcy declaration, 140,000 of the lost bitcoins were recovered, meaning that roughly $9 billion worth of bitcoins at today’s prices will be returned to their owners. At the time of the bankruptcy, bitcoin was trading at around $600. Today, its value is over $54,000, an increase of nearly 9,000%.
Mt. Gox moved billions of dollars’ worth of bitcoin from its crypto wallets on Thursday and Friday ahead of the repayment memo, according to data from Arcam Intelligence.
Arkham Intelligence said on Friday that more than 47,000 bitcoins worth $2.7 billion had been moved from offline cryptocurrency wallets linked to Mt. Gox.
According to Arcam, some of the funds, worth $84.9 million, were sent to Japanese cryptocurrency exchange Bitbank, which is listed on a platform that supports repayments to Mt. Gox users. Another $63.6 million worth of Bitcoin was sent to an unknown party, which Arcam said is “likely a listed repayment exchange.”
According to Arcam, Mt. Gox wallets hold 138,985 bitcoin, worth roughly $7.5 billion at current prices, meaning billions of dollars worth of cryptocurrency are yet to be paid out.
How will this impact Bitcoin?
Analysts previously told CNBC, While Mt. Gox’s repayment plan is expected to result in a massive sell-off of Bitcoin, this will likely be short-lived and will lead to further price increases later this year and into early 2025.
John Glover, chief investment officer at crypto-lending firm Ledn, told CNBC that the Mt. Gox users’ windfall will likely lead to a mass sell-off of Bitcoin as investors seek to lock in profits.
“A lot of people will obviously cash out and enjoy the fact that the Mt Gox collapse and their assets being frozen was the best investment they ever made,” said Glover, the former Barclays managing director. “Obviously, some will choose to take their money and run,” he said in emailed comments.
JPMorgan analysts said in a note last month that they expect Mt. Gox clients to sell some of their bitcoin to profit from the cryptocurrency’s surge.
“Assuming most of the liquidation by Mt. Gox creditors occurs in July, [this] “Cryptocurrency prices are on track to come under pressure in July but begin to recover from August onwards,” they wrote.
Ultimately, the total amount owed to creditors (approximately 140,000 Bitcoins) represents roughly 0.7% of the total amount of 19.7 million Bitcoins currently in circulation.
Analysts say this means there is enough liquidity to cushion the blow of any heavy selling, although it could still affect prices.
James Butterfill, head of research at CoinShares, told CNBC that billions of dollars’ worth of bitcoin have been traded on trusted exchanges every day this year, indicating “there is enough liquidity available to absorb these sell-offs during the summer months.”
Jacob Joseph, research analyst at CCData, agreed, saying the market is well-equipped to absorb selling pressure.
“Furthermore, a significant portion of creditors will likely accept a 10% discount on their holdings to receive early repayment, and overall selling pressure will be reduced as not all holdings will be liquidated on the open market,” he told CNBC in an email.