CoinShares has published an extensive document aimed at debunking the notion that the repayment of Mt. Gox in July will have an impact on Bitcoin’s price. Nevertheless, the report highlights potential challenges for Bitcoin Cash.
Mt. Gox, the notorious Japanese crypto exchange, is finally ready to compensate its creditors after enduring a devastating hack in 2011 and subsequently declaring bankruptcy. Despite this, industry insiders express concerns as fears regarding their ramifications on Bitcoin’s price intensify.
CoinShares, a digital asset management company, has issued a detailed analysis delving into the probable consequences on the already dwindling broader market value.
The Real Situation
As per the report, the Japanese trustee overseeing Mt. Gox, Nobuaki Kobayashi, holds approximately 142,000 Bitcoin and an equivalent amount in Bitcoin Cash. Initially valued at $75 million during Mt. Gox’s closure, the Bitcoin now stands at a staggering $8.85 billion, with Bitcoin Cash also valued at $55,250,000.
When the repayment announcement surfaced, creditors were given a choice between full cash reimbursement or full reimbursement in kind. The latter option implies receiving Bitcoins instead of cash alongside cash. The majority of creditors, as detailed in the CoinShares report, opted to receive the remaining assets in Bitcoin or Bitcoin Cash. Furthermore, all creditors have received or will receive some cash amounts.
As previously covered by Crypto News Flash, the in-kind repayment was slated to commence this month (July). Interestingly, the potential impact on Bitcoin’s price has led sellers to exit their positions or liquidate their assets, resulting in the ongoing market downturn that has seen BTC drop by 15% over the last 30 days, now trading at $58k.
Bitcoin Market Resilience Versus Bitcoin Cash’s Vulnerability
According to the CoinShares report, ample data suggests that the impact of the Mt. Gox overhang might not be as severe as anticipated. This is due to the fact that only 75% of creditors accepted an early lump sum offer representing around 90% of the owed amount (in kind). The remaining creditors opted to await the conclusion of the civil litigation, which could be a lengthy process.
This decision has significantly reduced the supply to be distributed this month to 95,000 Bitcoin. Furthermore, it is noted that 20% of the claims belong to Bitcoinica and MtGox Investment Funds (MGIF), both of which agreed to a 10% discount on their claims. Specifically, 10,000 BTC is owed to Bitcoinica, and 20,000 BTC is owed to MGIF.
The report reveals that MGIF has publicly affirmed no intentions to sell its BTC holdings. As a result, the 95,000 Bitcoins have been reduced to 75,000 BTC, with 65,000 BTC reportedly owed to individual creditors, excluding Botanica.
Notably, the distribution will take place on various exchanges on different dates throughout the month, reducing the likelihood of significant simultaneous selling. The average daily exchange inflow stands at 32,000 Bitcoin, with instances of 100,000 Bitcoin flowing to exchanges. On the day of the spot Bitcoin Exchange-Traded Funds (ETFs) launch on January 11, nearly 150,000 Bitcoin was recorded for daily inflow.
CoinShares points out that historical data on large inflows suggests the market could handle substantial volumes if these assets were sold in a day. This premise is backed by the fact that liquidations from Grayscale ETF this year have already stress-tested the market’s resilience.
CoinShares predicts that Bitcoin Cash could suffer due to its lower liquidity compared to Bitcoin and its relatively lower popularity among investors.