In the summer of 2024, the cryptocurrency exchange Mt. Gox, which collapsed in 2014, found itself back in the spotlight. This time, the reason for the attention was the announcement by its trustees that they were ready to begin repaying creditors. While this news might seem positive, it led to a decline in the crypto market. Investors fear a potential selloff of bitcoins (BTC) by Mt. Gox creditors.
The itez editorial team decided to delve into what happened with Mt. Gox, how much the exchange owes its clients and whether the repayments planned by the platform's trustees are something to be feared.
The rise and fall of Mt. Gox: A timeline of events
First, let's dig into Mt. Gox long story. The exchange dates back to the early days of the cryptocurrency industry.
2010. Developer Jed McCaleb founded the Mt. Gox platform to trade Magic: The Gathering cards. He soon decided to transform it into a bitcoin exchange Magic: The Gathering Online Exchange.
2011. McCaleb sold the platform to French developer Mark Karpeles. Under Karpeles' leadership, Mt. Gox quickly gained popularity. In June, the first major hacking attack occurred, resulting in the theft of 25,000 BTC from the platform. Bitcoin's price on the platform plummeted to one cent as a result.
2012-2013. Mt. Gox continued to grow. By 2013, the platform was handling about 70% of all bitcoin transactions worldwide. However, it also faced technical problems, leading to significant delays in transaction processing.
February 2014. Mt. Gox suddenly halted bitcoin withdrawals, citing a bug in the code that allowed double spending. It was later revealed that fraudsters had managed to withdraw about 850,000 BTC from the platform. On February 28, Mt. Gox declared bankruptcy.
March 2014. Mt. Gox reported finding about 200,000 BTC stored at an old address, reducing the total loss to 650,000 BTC.
2014-2020. Legal proceedings and civil rehabilitation processes took place. Authorities conducted investigations, including the arrest of BTCe administrator Alexander Vinnik on charges of laundering Mt. Gox's stolen funds.
May 2016. The cryptocurrency exchange Kraken completed the process of collecting and analysing creditors' claims. 24,750 users submitted claims for compensation.
February 2021. The Tokyo District Court approved a plan to compensate creditors with bitcoins. Mt. Gox trustee Nobuaki Kobayashi began preparing for the repayment of funds.
May 2024. Significant movements of bitcoins from the Mt. Gox wallet caused a wave of rumours and concerns in the crypto community.
July 2024. The start of compensation payments to creditors in bitcoins and Bitcoin Cash (BCH).
How much money Mt. Gox owes creditors
As of today, the amount of assets intended for distribution is 142,000 BTC, 143,000 BCH, and 69 billion Japanese yen. Investors are most concerned about the fate of bitcoins. The 142,000 BTC represents nearly 0.7% of the total bitcoin supply. It is worth noting that the total number of bitcoins that will ever be issued is 21 million.
For comparison, the largest BTC investor among public companies, MicroStrategy, holds 226,331 coins (slightly more than 1% of the total supply). MicroStrategy accumulated this volume of bitcoins through regular purchases over four years.
The orange curve shows how MicroStrategy's Bitcoin balance has changed. The green curve reflects the value of the company's Bitcoin balance in dollars, the blue curve shows the Bitcoin exchange rate, and the blue curve shows the market value of the organisation's shares. Source: bitcointreasuries
How Mt. Gox repayments to creditors could affect the market
The expected repayments to Mt. Gox creditors are scheduled for July 2024. The influx of such a significant amount of assets into the market could cause serious price fluctuations. However, negative forecasts might not materialise, and here’s why:
Most of the exchange's creditors will not sell their bitcoins, according to Alex Thorn, head of research at Galaxy Research. If his assumptions are correct, sellers will not be able to put pressure on the BTC price as expected.
There are many buyers waiting to purchase the released bitcoins, shared Anthony Pompliano, cofounder of Morgan Creek Digital. He believes that buyers are waiting for dips to buy cheap coins, thereby mitigating the cryptocurrency’s price drop.
One less "scary story". Tom Lee, co-founder of Fundstrat Global Advisors and head of the company's research department, noted that the end of the Mt. Gox repayment saga will reduce pressure, as a major time bomb will disappear from the "radar."
Conclusion
The collapse of Mt. Gox was one of the most significant events in the history of the cryptocurrency market. It highlighted the importance of protecting trading platforms and became a starting point for forming regulatory norms for the crypto industry.
Despite negative expectations, the repayments to Mt. Gox creditors may not put pressure on the cryptocurrency’s price. Even in the event of a BTC decline due to the repayments, it is important to remember that sooner or later, the released coins will be depleted, seller pressure will weaken, and bitcoin could move towards new highs predicted by analysts.
🤔 Do you think about Mt. Gox case? Share your views in our socials!
💌 Telegram, Twitter, Instagram, Facebook
Here are three other cool articles:
How to bridge to Polygon: a comprehensive guide to using the Polygon Bridge
Top 5 NFT games in 2024: the future of blockchain gaming
How to bridge to Arbitrum: a comprehensive guide
This article is not investment advice or a recommendation to purchase any specific product or service. The financial transactions mentioned in the article are not a guide to action. It’s not intended to constitute a comprehensive statement of all possible risks. You should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about making any operations with cryptocurrency.
