Analyst: The impact of Mt. Gox repayment on BTC is not as bad as imagined

Author: Tom Mitchelhill, CoinTelegraph; Compiler: Deng Tong, Golden Finance

Mt. Gox is set to repay $8.5 billion worth of bitcoin to creditors next month, and analysts say that this may not have as big an impact on the price of bitcoin as many people expect.

IG Markets analyst Tony Sycamore noted that there are too many historical factors to make specific predictions about the impact of the upcoming repayment, but estimated that about half of the bitcoins - worth about $4.5 billion - may begin to enter the market in July.

Mt. Gox was a Japanese cryptocurrency exchange that collapsed after being hacked in February 2014. The exchange lost about 940,000 BTC, which was worth only $64 million at the time.

Mt. Gox recovered 141,687 BTC to return to creditors, worth $8.5 billion at press time. Payments to creditors will begin in early July.

While an influx of bitcoin may be imminent, Sycamore said he believes much of the so-called selling pressure at Mt. Gox is already reflected in current market conditions.

“The repayments have been going on for a long time,” he said.

Sycamore said: "The repayments are occurring against the backdrop of deteriorating market sentiment, technical selling and outflows from Bitcoin ETFs." He added that much of the speculative "hot money" in the crypto space has left to chase "greener pastures" in large-cap stocks such as Nvidia and Apple in the stock market.

Speaking about the broader Bitcoin price action, Sycamore said he does not believe the current sell-off will have much further to fall. He pointed to strong support from the 200-day moving average as reason for optimism in the weeks ahead.

“I suspect this may have provided a fairly good entry point for those who had been holding out for higher buy levels.”

In a June 25 X post, Galaxy Digital’s head of research Alex Thorn estimated that only 65,000 of the 141,000 bitcoins actually made it to the market in their entirety — significantly reducing the expected sell-off activity.

Thorn predicted that around 75% of creditors chose to accept “early” payments, sacrificing 10% of repayments in the process, resulting in around 95,000 BTC coming to the market.

In addition, he added that the claims fund was owed 20,000 BTC and Bitcoinica BK was owed around 10,000 BTC, leaving only 65,000 BTC to go to general creditors.

Source: Galaxy Research

Mt. Gox Creditors May Hold BTC for a Long Time

In addition, Thorn explained that there are several reasons to believe that individual Mt. Gox creditors will be more "generous" than the market expects.

He noted that most creditors tend to be “long-term Bitcoin holders” and are more likely to hold Bitcoin, and stressed that many individual creditors have resisted “compelling and aggressive proposals” in their claims for years that offered U.S. dollar payments, suggesting they want their Bitcoin back, not fiat currency.

He also pointed out the impact of capital gains taxes on sellers, saying that while the original creditors received only 15% of their recovery in kind, many creditors have seen a 140-fold increase in their gains since the Bitcoin was recovered in bankruptcy proceedings.

Thorn said the potential selling pressure on Bitcoin Cash could be “much more severe” because many investors never actually bought BCH directly and only received it as a result of the Bitcoin hard fork that occurred in 2017.