Bitcoin
Gox Is Finally Refunding Customers, So Why Are Bitcoin Investors Nervous?
Key Takeaways
- Failed bitcoin exchange Mt. Gox will begin returning assets to customers in July 2024, more than a decade after it was hacked.
- The number of bitcoins going to former clients is not yet certain and could range from 65,000 to 140,000, worth almost US$9 billion at the upper limit.
- Some bitcoin holders are concerned that the distribution could lead to increased selling pressure.
- The price of bitcoin fell below $61,000 on the news, continuing a downward trend for the month.
Failed Bitcoin Exchange Mt. Gox Will Finally Start Returning Bitcoin (BitcoinUSD) to customers in July 2024, nearly a decade after a massive hack bankrupted it.
The number of bitcoins going to former clients is not yet certain and could range from 65,000 by estimate to as many as 140,000 based on addresses connected to Mt. Gox, which at the high end could be worth almost $9 billion.
This sudden supply hitting the markets has bitcoin investors worried about lower prices. Bitcoin, although in a downtrend overall, fell further on Monday to below $61,000 at noon ET.
What happened to Mt. Gox?
Mount Gox, which once accounted for around 70% of global bitcoin trade, was hacked several times between 2011 and 2014 and thousands of bitcoins disappeared, triggering a long process of customers trying to recover their crypto or money. The exchange declared bankruptcy in 2014.
Mt. Gox’s long-awaited distribution of client funds comes after years of delays; however, Rehabilitation Administrator Nobuaki Kobayashi stated that preparations for these refunds are well underway, ensuring that all necessary safety measures are in place before distribution begins.
In addition to bitcoin, former customers will also receive Bitcoin Moneyas the alternative cryptocurrency was launched as a “hard fork“of bitcoin in 2017, meaning that all bitcoin holders at the time received an equivalent amount of Bitcoin Cash. This development follows a substantial transfer of over 140,000 bitcoins from cold wallets to an unknown address in May, marking the first move in five years.
Why is refund making crypto investors nervous?
Some anticipate that the impending refunds will put selling pressure on the Bitcoin and Bitcoin Cash markets.
“This is like more than half of all ETF inflows being denied at once,” Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, posted. The demand created by inflows into spot bitcoin ETFs has been credited with a sharp rise in bitcoin prices since they began trading on January 11. To date, these products have accumulated more than $14.5 billion in net inflows.
Early investors receiving these assets, especially those who entered the market before 2013, may be tempted to sell part of their holdings due to the significant increase in value since their initial investment.
However, the potential selling pressure on bitcoin created by this event may be exaggerated, said Alistair Milne, CIO at Altana Digital Currency Fund. “Mt Gox creditors in need of funds (i.e. weak hands) have had about 10 years to sell their credits,” Milne posted on X. “No distressed/urgent sellers left.”