Bitcoin is trading below $60,000 for the first time since early May as the MtGox exchange announced that it will begin distributing approximately $9 billion worth of the cryptocurrency and $50 million of bitcoin cash to its long-suffering creditors. MtGox, once the largest spot bitcoin exchange in the world, shut down in 2014 after a series of hacks, leaving thousands of creditors stranded. Authorities have identified the hackers, with two Russian nationals charged for laundering bitcoins from the exchange. Over the years, MtGox has faced delays in repaying creditors, but trustee Nobuaki Kobayashi announced that distribution will begin next month to agreed cryptocurrency exchanges.
The announcement of the distribution led to more than $200 million in long positions being forcibly liquidated in the past 12 hours, according to Georgi Koreli, cofounder and CEO of privacy protocol Hinkal. However, Alex Thorn, head of research at Galaxy Digital, believes the market is overestimating the impact of the distribution. Of the 140,000 bitcoins held by the bankruptcy estate, only about 65,000 are set to be delivered to 20,000 individual creditors, many of whom are tech-savvy early bitcoin investors. Thorn noted that tax implications may prevent creditors from selling all their tokens at once, reducing the impact on the market.
The remaining tokens will be sent to large claims funds and a separate bankruptcy, with Thorn suggesting that significant selling from this cohort is unlikely. Matt Hougan, chief investment officer of Bitwise, also believes that most early investors have already sold their claims, with the real amount likely to come to the market closer to $3 billion than $10 billion. Bitcoin cash, on the other hand, is expected to fare worse as it was created in 2017 as a result of a blockchain split and is unlikely to be popular among the MtGox creditors. Bitcoin remains the more liquid option on exchanges like Kraken and Bitstamp.
All known MtGox trustee wallet addresses can be tracked via Arkham Intelligence. Despite the distribution announcement, Bitcoin was recently trading at $59,026, down 8.3% in the past 24 hours. The market reaction to the distribution news has been mixed, with some investors seeing it as an opportunity to ‘buy the dip’ while others are cautious about the potential impact of the large amount of bitcoin and bitcoin cash being distributed to creditors. As the distribution process begins next month, the crypto market will continue to monitor the situation closely.
