CoinShares has published an extensive analysis aiming to debunk the notion that July’s Mt. Gox repayment would negatively impact Bitcoin’s price. However, the report highlights potential vulnerabilities for Bitcoin Cash due to two key factors.
Mt. Gox, the notorious Japanese cryptocurrency exchange, is poised to reimburse creditors following its 2011 hack and subsequent bankruptcy. Despite this, concerns loom among market insiders regarding its potential influence on Bitcoin’s price.
CoinShares, a digital asset management firm, has conducted a thorough investigation into the potential ramifications on the already volatile cryptocurrency market.
Here’s the Current Scenario:
The report reveals that Nobuaki Kobayashi, the trustee managing Mt. Gox’s affairs, holds approximately 142,000 Bitcoin (BTC) and an equivalent amount in Bitcoin Cash (BCH). Initially valued at $75 million during Mt. Gox’s closure, these holdings have now surged to $8.85 billion for Bitcoin and $55.25 million for Bitcoin Cash.
Creditors were offered the choice between full cash repayment or repayment in kind, opting to receive Bitcoins instead of cash alongside partial cash settlements. Most creditors, as detailed in the CoinShares report, have opted for cryptocurrency assets, ensuring that all creditors receive or will soon receive partial cash settlements.
As previously reported by Crypto News Flash, the repayment process was scheduled to commence in July. Interestingly, the anticipated impact on Bitcoin’s price has driven some to sell off their positions or liquidate assets, contributing to the ongoing market downturn, which has seen BTC plummet by 15% over the past 30 days, settling at $58,000.
Bitcoin’s Resilience Versus Bitcoin Cash’s Vulnerability:
According to CoinShares, extensive data indicates that the Mt. Gox repayment’s impact might be less severe than feared. This is partly due to only 75% of creditors opting for an early lump sum equivalent to 90% of their owed amount in cryptocurrency. The remaining creditors have chosen to await the conclusion of civil litigation, a process likely to be protracted. Consequently, the amount of Bitcoin to be distributed this month has decreased to 95,000.
Additionally, approximately 20% of claims are attributed to Bitcoinica and MtGox Investment Funds (MGIF), both of which have agreed to a 10% reduction on their claims. Specifically, Bitcoinica is owed 10,000 BTC, and MGIF is owed 20,000 BTC. Notably, MGIF has publicly stated its intention to retain its Bitcoin holdings, thus reducing the available distribution to 75,000 BTC, excluding Bitcoinica, of which 65,000 BTC are reportedly allocated to individual creditors.
The distribution process will span different dates and exchanges throughout the month, minimizing the risk of a concentrated sell-off. On average, daily exchange inflows amount to 32,000 Bitcoin, with occasional peaks of 100,000 Bitcoin recorded during past periods. For instance, the launch of spot Bitcoin Exchange-Traded Funds (ETFs) on January 11 saw nearly 150,000 Bitcoin flowing daily into exchanges.
CoinShares notes that previous large inflows suggest the market’s capacity to absorb significant volumes, even if all distributed assets were sold off in a single day. The report points out that liquidations from Grayscale ETFs earlier this year have already tested this resilience.
Regarding Bitcoin Cash, CoinShares anticipates potential difficulties due to its lower liquidity and comparatively weaker investor sentiment.
In conclusion, CoinShares’ report provides a nuanced outlook on the upcoming Mt. Gox repayments, emphasizing Bitcoin’s robust market resilience while cautioning about potential challenges for Bitcoin Cash in the face of market dynamics.