More On: BITCOIN
How much 6 popular cryptocurrencies lost in 2022 ?
How people who watch the market were wrong about bitcoin in 2022
Twitter Is Too Musk to Fail
Why Jim Cramer suggests purchasing bitcoin or ethereum, with one exception
El Salvador's bitcoin experiment has cost $375 million so far and lost $60 million
Mt Gox is about to release 137,000 BTC to creditors that have been locked up for the past seven years. How might this affect the Bitcoin price, and will it cause a further decline?
Soon, 137,000 BTC worth approximately $2.8 billion will be released into the market as compensation for the 2011 Mt. Gox hack and subsequent loss of 850,000 BTC worth approximately $17.8 billion at the current price. Mt. Gox announced in 2014 that it had discovered 200,000 BTC, but those coins have been subject to litigation until now.
In November 2021, Mt. Gox issued a formal "Rehabilitation Plan" to return lost funds to investors who lost access to their cryptocurrencies roughly seven years prior. Then, on July 6, 2022, Mt. Gox and "Rehabilitation Trustee" Nobauaki Kobayashi emailed creditors with the option to receive either USD, BTC, or BCH. The news brings the release of funds to creditors closer than ever before.
Will the Mt. Gox coins affect the price of Bitcoin?
According to Miles Deutscher, a crypto analyst and host of Crypto Banter, many investors are concerned that the release of 137,000 BTC could cause a catastrophic decline in the price of Bitcoin due to increased sell pressure.
24/ Creditors have the option of receiving USD, $BTC or $BCH. It's estimated that creditors will start receiving funds as early as August.
— Miles Deutscher (@milesdeutscher) July 9, 2022
Many people are panicking that the release of these funds will lead to a huge supply-dump, which could significantly impact the $BTC price.
Some have even theorized that a decline in Bitcoin's price could coincide with the Ethereum merge, resulting in the realization of "The Flippening." The Flippening is a hypothetical event in which Ethereum surpasses Bitcoin in market capitalization, which could occur if Bitcoin fell to $10,000 and Ethereum rose 30% from its current price.
The Ethereum Merge is timed perfectly with Mt. Gox users dumping ~140k BTC (~$3 billion) in late August 2022.
— EthereumJesus.eth⟠🙌🏻🦇🔊🐼 (@EthereumJesus) July 7, 2022
The Flippening is upon us frens.
However, these concerns may be unfounded as numerous creditors have already sold their claims to cryptocurrency funds. Groups such as Fortress Investment Group LLC provided creditors with a cash advance of between $600 and $1,300. The managing director of Fortress, Michael Hourigan, was quoted as saying;
Instead of waiting another one to one and a half years, we offer a liquidity option for creditors who wish to receive cash or BTC immediately.
In addition, creditors who have not yet accepted an early settlement may be hesitant to liquidate their Bitcoin holdings, as they represent early crypto believers. When Bitcoin is down more than 60 percent from its all-time high, it is reasonable to assume that many individuals who receive Bitcoin payments are more likely to store them in cold storage than to sell them.
It is possible that some of the released funds will be invested in alternative cryptocurrencies such as Ethereum, which is approaching its most significant moment in history. Prior to 2014, there were few if any alternatives to Bitcoin, but by 2022, tens of thousands of crypto projects could receive an influx of capital.
What happens if Bitcoins are liquidated?
A portion of Bitcoin has already been sold prior to its upcoming release. Kobayashi sold 24,658 BTC (worth $260 million at the time) during a creditors' meeting in 2018. The offer
"it was necessary and proper to obtain a sufficient sum of money to secure the interests of the creditors for the principal amount and delay damages of the adjudicated and unadjudicated bankruptcy claims."
The liquidation marked the peak of 2017's bull run, as shown in the following chart. Following the decline in the number of Bitcoins held by Mt. Gox, the price of Bitcoin fell precipitating a bear market in 2018 from which it did not recover until late 2020.
If the release of the remaining Mt. Gox funds had a similar impact on Bitcoin's price, it would likely fall below $10,000. However, there has been equal sell pressure on Bitcoin from parties such as Luna Foundation Guard, Three Arrows Capital, and Bitcoin miners over the past few months.
The market absorbed the selling pressure exerted by LFG, resulting in a negligible impact on Bitcoin. Bitcoin's price declined in the weeks that followed the event due to a shift in market sentiment and global outlook. The markets may be able to absorb any selling by Mt. Gox creditors, but the social sentiment of early Bitcoin adopters giving up their coins may create a bearish psychological sentiment.
** Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of USA GAG nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
