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- Mt.Gox is in a bid to repay its creditors about $9.4 billion, placing a selloff strain on Bitcoin (BTC).
- While a selloff is imminent, the impact might be cushioned by other key network trends.
Bitcoin (BTC), the world’s leading cryptocurrency has come under intense scrutiny as Mt.Gox commences a $9.4 billion repayment to investors. According to reports, 137,890 BTC coins were moved out of wallets belonging to Mt.Gox to creditors.
Mt.Gox Bitcoin Repayment Plan Raises Concerns
The movement of the large amount of BTC raises concerns about a potential sell-off that could drive down the price of Bitcoin. As a reminder, Mt.Gox was one of the largest Bitcoin exchanges before it was hacked in 2014. Following reports from Crypto News Flash, the exchange processed 70% of all Bitcoin transactions worldwide at the time. Following the hack, it reported 840,000 BTC in stolen funds.
Last year, the US Department of Justice (DOJ) identified two Russian nationals as hackers responsible for the stolen BTC. Before the DOJ’s involvement, the Japanese government authorized a rehabilitation plan in 2021, enabling creditors to recoup a portion of their lost money. The recent movement of BTC coins is believed to be part of the distribution process.
The potential influx of Bitcoin from Mt.Gox repayments has divided experts. Some fear it could flood the market, leading to a price drop. This fear is heightened by the recent 4% decline in Bitcoin’s price, suggesting some investors have already been cashing in on its rally.
The Bitcoin market can be broadly divided into Long-Term Holders (LTHs) and Short-Term Holders (STHs). LTHs are investors that have held their BTC coin for over 155 days. Generally, they are considered more resolute, and less influenced by market volatility. On the other hand, STHs are investors that have bought Bitcoin within the past 155 days. These investors may sell more quickly in reaction to unfavorable sentiment.
The actions of these investors might have a bearing on the expected selloffs from the Mt.Gox Bitcoin distribution
Positive Sentiments Spring Up for BTC
Crypto analyst James Van Straten points to the recent resilience of the Bitcoin market in absorbing large selloffs. He cites an example where Grayscale Bitcoin Trust and LTHs offloaded around 1 million BTC in the past five months, with minimal price disruption. He emphasized that Mt. Gox’s repayments represent a fraction of this amount, suggesting the market might be able to handle it without a major crash.
Meanwhile, data from research firm Glassnode released earlier this year shows the number of Bitcoin addresses holding onto coins for more than 5 years reached a new low. This indicates some long-term investors were taking profits. As a result, not all creditors will be rushing to sell.
Some may choose to hold onto their recovered BTC, or even buy more, depending on their investment strategies. The long-term impact, some argue, could even be positive.
At the time of this writing, BTC is trading at $66,003, demonstrating a decline of 0.38% over 24 hours. The market cap is pegged at $1.3 trillion, while trading volume is $17.6 billion.
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