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Mt. Gox Is Finally Paying Back Customers, So Why Are Bitcoin Investors Nervous?
Key points
- Failed bitcoin exchange Mt. Gox will begin returning assets to customers in July 2024, more than a decade after it was hacked.
- The number of bitcoins destined for former customers is not yet certain and could vary from 65,000 to 140,000, for a maximum value of almost $9 billion.
- Some bitcoin holders fear the distribution could lead to increased selling pressure.
- On the news, the price of bitcoin fell below $61,000, continuing its downward trend for the month.
Failed bitcoin exchange Mt. Gox will finally start returning bitcoin (BitcoinUSD) to customers in July 2024, nearly a decade after a massive cyberattack forced it into bankruptcy.
The number of bitcoins going to former customers is not yet certain and could range from 65,000 according to an estimate up to 140,000 according to addresses linked to Mt. Gox, which at the high end could be worth almost $9 billion.
That sudden supply hitting the markets has bitcoin investors worried about lower prices. Bitcoin, while generally trending down, slipped further on Monday to fall below $61,000 by midday ET.
What happened to Mt. Gox?
Mount Gox, which once accounted for about 70% of global bitcoin trade, was hacked multiple times between 2011 and 2014 and thousands of bitcoins were lost, triggering a long process of customers trying to recover their cryptocurrencies or money . The exchange filed for bankruptcy in 2014.
The long-awaited distribution of Mt.Gox client funds comes after years of delays; However, Rehabilitation Trustee Nobuaki Kobayashi said preparations for these refunds are well underway, ensuring that all necessary safety measures are in place before distribution begins.
In addition to bitcoin, former customers will also receive it Bitcoin Cashas the alternative cryptocurrency was launched as “hard fork” of bitcoin in 2017, meaning that all bitcoin holders at that time received an equivalent amount of Bitcoin Cash. This development follows a substantial transfer of more than 140,000 bitcoins from cold wallets to an unknown address in May, marking the first movement in five years.
Why does redemption make cryptocurrency investors nervous?
Some predict that the upcoming redemptions will put selling pressure on both the Bitcoin and Bitcoin Cash markets.
“That means more than half of all ETF inflows are being wiped out in one fell swoop,” wrote Eric Balchunas, senior ETF analyst at Bloomberg Intelligence. Demand created by inflows into spot bitcoin ETFs has been credited with a sharp rise in bitcoin prices since they began trading on Jan. 11. The products have so far racked up more than $14.5 billion in net inflows.
Early investors receiving these assets, especially those who entered the market before 2013, may be tempted to sell some of their holdings due to the significant increase in value compared to their initial investment.
However, the potential selling pressure on bitcoin created by this event could be too much, said Alistair Milne, CIO of the Altana Digital Currency Fund. “Mt Gox creditors in need of funds (i.e. weak hands) have had approximately 10 years to sell their receivables,” Milne posted on X. “There are no distressed/urgent sellers left.”