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Mt Gox Earthquake Begins: Crypto Market Jitters as 47,229 BTC Move to New Addresses

Last Updated July 5, 2024 10:40 AM
Teuta Franjkovic
Last Updated July 5, 2024 10:40 AM
By Teuta Franjkovic
Verified by Insha Zia

Key Takeaways

  • Mt. Gox’s cold wallet has been on the move.
  • The defunct exchange has transferred bitcoins worth billions to different wallet addresses.
  • Mt. Gox is preparing to repay claimants starting in July 2024.
  • The reimbursements could impact the market, claim K33 analysts.

Scandal-ridden Bitcoin exchange Mt. Gox is on the verge of executing one of the largest repayments in history, a full decade after ceasing operations. In the following weeks, the now-defunct Japanese exchange looks to repay claimants over $9 billion in Bitcoin, Bitcoin Cash, and fiat currency.

On Thursday, July 4, the crypto market trembled as Mt. Gox moved billions to new wallet addresses in preparation for the payout.

Mt. Gox $9B Bitcoin Repayment Sparks Market Volatility Concerns

According to a Thursday X post  by Arkham Intelligence, a cold storage wallet linked to Mt. Gox transferred 47,228 BTC to a wallet address ending in “6onk.” The transfer is likely part of the exchange’s scheduled early July creditor repayments, as Mt. Gox aims to distribute $9 billion in Bitcoin to its creditors.

 

 

Hours later, Arkham Intelligence updated  that the new wallet address returned 2,702 BTC (valued at $154.7 million) to Mt Gox’s cold storage and transferred 44,527 BTC to another address starting with “16ArP.”

Subsequently, at 6:30 AM CET, the 2,702 Bitcoins that Mt. Gox had sent were moved again to a different wallet.

Mt.Gox removes BTC
Credit: Arkham Intelligence

Mt. Gox Users See End of the Tunnel

Over a decade after the exchange’s collapse due to a 2014 hack, creditors of Mt. Gox are finally seeing progress toward recovering their funds. A verification process the trustee led in January has facilitated the delayed return of the funds. While the exact dates for payouts to designated exchanges remain undisclosed, the process is evidently advancing.

In June, the exchange’s trustee, Nobuaki Kobayashi, confirmed  that preparations for repayment were complete and would commence early July as planned.

The total disbursement, expected by October 2024, includes 142,000 Bitcoin, 143,000 Bitcoin Cash, and 69 billion yen. This significant distribution marks a crucial step in resolving one of the crypto’s longest-standing issues.

Several Mt. Gox creditors have updated their claims recently, indicating progress in receiving repayments in both cryptocurrency and fiat currency.

Initial reports surfaced on the Mt. Gox insolvency Subreddit  in mid-April, where users shared details about expected payments reflected in their account’s repayment data table. Additionally, some creditors have reported successfully receiving fiat currencies in their bank accounts.

Some clarity for Chase Customers, and general info. 
byu/Gullible_Nectarine_3  inmtgoxinsolvency 

However, the development was shadowed by concerns from financial analysts. In an email shared with CCN, K33 Research has stated that reintroducing a significant amount of Bitcoin back into the market could lead to price instability and potentially exert downward pressure on Bitcoin’s value.

Mt Gox Creditors Face Varying Wait Times for Repayments Based on Exchange Partners

Creditors of the defunct Mt Gox exchange may face wait times of up to three months to receive their Bitcoin or Bitcoin cash repayments, depending on the crypto exchanges involved, as outlined in a trustee document.

The trustee announced  on July 5, that repayment efforts have commenced for a portion of the designated crypto exchanges according to the rehabilitation plan. The timeline for these payouts to be reflected in creditors’ accounts varies by exchange: Kraken may take up to 90 days, Bitstamp up to 60 days, BitGo will show payouts within 20 days, and both SBI VC Trade and Bitbank will complete payouts within 14 days.

Mt. Gox to Return Billions in Bitcoin and Bitcoin Cash to Hack Victims

In June, Mt. Gox has announced  it will begin distributing recovered Bitcoin (BTC) and Bitcoin Cash (BCH) to creditors starting in July 2024.

This marked a significant milestone in the ongoing rehabilitation plan that commenced following the exchange’s collapse in 2014 due to a massive hack. After the repayments were made public, the crypto community began speculating  if Bitcoin had reached its lowest point, looking at past trends for clues.

According to court documents  and creditor reports, Mt. Gox said it plans to distribute a significant amount of recovered cryptocurrency in the following way:

  • 142,000 BTC: This sum, valued at around $8.8 billion based on the current Bitcoin price of $62,000 per BTC, represents part of the Bitcoin lost in the 2014 hack.
  • 143,000 BCH: With the current price of Bitcoin Cash at approximately $650 per BCH, this amount is valued at roughly $400 million.
Mt.Gox announcement
Credit: Mt.Gox

The precise timeline for the distribution was then still not revealed, but creditors will receive their shares in proportion to their verified claims. According to the notice, repayments would be processed through cryptocurrency exchanges that have finalized the required exchange and confirmation procedures with the Rehabilitation Trustee.

Crypto Market on Edge: Mt. Gox to Inject Billions, Bitcoin Fate Uncertain

The impending Mt. Gox distribution could have varied effects on the cryptocurrency market. The release of a significant amount of Bitcoin Cash (BCH) might increase supply and exert downward pressure on its price. However, this could be counterbalanced by creditors who might seek to sell or trade their BCH, potentially driving up demand.

For Bitcoin (BTC), the impact is expected to be less pronounced. The amount being distributed is a small fraction of the total circulating supply, so its direct effect on the price is likely to be minimal. Nevertheless, the overall sentiment surrounding Mt. Gox’s asset return could temporarily influence market attitudes toward Bitcoin.

Currently, as news of the forthcoming repayments spreads, Bitcoin is trading at $62,100 . However, it has seen a 2.7% drop in the past 24 hours and a 5.3% decline over the past week.

Bitcoin price
Credit: CoinMarketCap

Sparking Bitcoin Bottom Speculation: Could History Repeat?

Following the public announcement of the repayments, the crypto community began speculating  whether Bitcoin has reached its bottom, drawing on historical patterns for insight.

 

Historically, fear, uncertainty, and doubt (FUD) surrounding Mt. Gox often signals the final dip before Bitcoin starts to rise again. The most recent instance was on January 23rd, which marked the bottom before Bitcoin surged to a new all-time high.

Analyzing the BTC/USD chart reveals numerous double bottom patterns, a bullish reversal indicator suggesting potential upward price movements after each identified bottom.

BTC pattern
Credit: TradingView

Bitcoin is currently trading at approximately $61,100 at the time of writing. Considering the dense concentration of double bottoms and the oversold stochastic reading, there is a technical basis for anticipating a short-term rebound.

If the double bottom patterns hold, Bitcoin could find support around the recent lows of around $60,000. Given the oversold condition, a minor rebound towards the $62,000 – $63,000 range is plausible. In terms of resistance levels, near-term resistance is around $64,000, where previous consolidation occurred.

Skepticism Meets Market Concerns Amid Bitcoin Sell-Off Fears

Still, the crypto community is skeptical. This is not the first time Mt.Gox has announced paying back its creditors. According to  the X user igloobamboo, similar announcements were given in 2017, 2021, 2022 and 2023.

However, a recent transfer of 137,890 BTC (worth $9.4 billion) from a wallet, believed to be destined for creditors, has sparked concern in the market. Experts are divided on the implications, with many fearing increased selling pressure could lead to a drop in Bitcoin’s price.

Mark Karpeles, the former CEO of Mt. Gox, then clarified  that the recent transfer of Bitcoins from the exchange’s wallet is not a sell-off but part of a larger plan to distribute funds to creditors.

Analyst James Van Straten also highlighted  the impact of the Mt. Gox repayment event on the market. According to his insights shared on X, Grayscale Bitcoin Trust and Long Term Holders have collectively sold approximately 1 million BTC over the past five months.

Despite this substantial sell-off, the market has demonstrated remarkable resilience in absorbing these transactions. For context, the BTC to be repaid by Mt. Gox to its creditors represents only 10% of the total sold.

Recent market dynamics, including a Bitcoin rally that saw prices reach an all-time high earlier this year, have incentivized some Long Term Holders to sell, reducing their overall supply. Van Straten suggested  that this recent decrease in Long Term Holder holdings significantly outweighs the BTC released through Mt. Gox repayments.

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