Mt. Gox Repayment & Implications on Bitcoin

The upcoming Mt. Gox repayment in October 2023 could potentially sway the Bitcoin market in unforeseen ways.

The October repayment deadline of Mt. Gox, the hacked Bitcoin exchange, is nearing, and crypto enthusiasts are keeping a close watch on this potential industry-defining event. With an estimated 70% of all Bitcoin transactions facilitated by Mt. Gox before its fall, the impact of the approaching repayment deadline could bring a significant shift in the cryptocurrency market.

In 2014, Mt. Gox suffered one of the largest cryptocurrency bankruptcies in history, losing 850,000 BTC (equivalent to 4% of all Bitcoins) to a security breach. Nine years have passed since then, with the creditors still waiting for their compensation.

The possibility of repayment by October 2023 has prompted an industry-wide discussion, with many speculating about the potential impact on the Bitcoin market. Would there be a massive sell-off, and could Bitcoin prices experience a steep fall? These questions loom as we approach the repayment deadline.

What Happens After Mt. Gox Repays its Investors?

Jacob King, the founder and CEO of WhaleWire, offers an insight into the potential fallout of the repayment. He foresees an influx of sell orders once creditors retrieve their lost Bitcoin. The selling pressure could trigger a market downturn and lead to price instability, given the prolonged delays in the repayment process which have already caused disillusionment among investors.

Despite the financial losses suffered from the Mt. Gox debacle, some creditors remain optimistic about their Bitcoin holdings. A self-identified Mt. Gox creditor has stated that most of the claimants may choose to hold on to their coins even after repayment. The fear of a price drop, however, might prompt non-claimant Bitcoin owners to sell off their holdings.

The Magnitude of Mt. Gox’s Repayment

The October repayment plan aims to address the claims of over 10,000 crypto creditors worldwide. Mt. Gox intends to repay only part of the total losses from the hack, as the company was only able to recover a portion of the lost funds.

Reports suggest that the creditors will receive 142,000 BTC ($4.3 billion), along with 143,000 in forked cryptocurrency, Bitcoin Cash (valued approximately at $40 million). An additional payout of 69 billion Japanese yen ($510 million) is also on the cards. The payments will be made in a mix of fiat currency and cryptocurrencies, coordinated individually with each investor.

The upcoming Mt. Gox payout, according to Frank Weert, co-founder of Whale Alert, is indeed a massive event. He asserts that its impact on the market largely depends on the nature of fund release and media reporting. While some might be eager to cash out immediately, a massive sell-off seems unlikely.

Mt. Gox Bitcoin Repayment and the Market

The Bitcoin amount set for distribution to Mt. Gox creditors is comparable to the holdings of Bitcoin advocate Michael Saylor, who owns approximately 152,333 BTC ($4.52 billion). Mati Greenspan, founder of Quantum Economics, believes the market can absorb the payment without significant disruption due to the larger daily on-chain and exchange volumes.

Greenspan points out that this mass distribution event could reactivate many original Bitcoin holders. While some might choose to sell, many could turn into advocates of self-custody. He also regards the Mt. Gox repayment as a positive step in eliminating the market fear, uncertainty, and doubt (FUD) that has lingered for many years.