Bitcoin
Here’s Why $9,000,000,000 in Mt. Gox Refunds May Not Impact Bitcoin Price Much, According to Galaxy Executive
The head of research at cryptocurrency financial services firm Galaxy is calming fears that Mt. Gox’s long-awaited refunds could trigger a Bitcoin crash (Bitcoin).
In a new interview on the Unchained Podcast YouTube channel, Alex Thorn says that defunct cryptocurrency exchange Mt. Gox is set to repay creditors around 142,000 BTC worth nearly $9 billion from July through October.
The news of the impending BTC disbursement from Mt. Gox sent shockwaves through the crypto markets last week, triggering more than US$313 million in settlements.
But Thorn says the fear surrounding the Mt. Gox saga is probably exaggerated, as his research indicates that less than half of the coins are likely to be available for sale on the open market after issuance. He also says that recipients will likely hold on to their BTC stack rather than selling outright.
According to Thorn, individuals who will receive their BTC in the coming months have agreed to take a 10% to 11% cut to take advantage of Mt. Gox’s early payment scheme. Thorn estimates that 75% of lenders have accepted the deal, reducing the number of BTC for delivery to 94,600 coins.
The Galaxy executive goes on to note that many people have already sold their bankruptcy claims to funds at a discount. According to Thorn, the funds were aggressively buying up claims from Mt. Gox users who didn’t want to wait years before seeing a single cent of their money.
“Many people sold their coins and we think that around 20,000 Bitcoins are held in these funds. So let’s put that aside for a second. So now we are at 74,000 coins.”
Thorn notes that the funds that bought the bankruptcy orders are unlikely to be major sources of sales because he believes the entities that provided liquidity to buy the orders will hold the coins when they are released.
“My understanding from talking to some of them is that they all plan to deliver cash to their LPs (liquidity providers)… Again, from talking to some large LPs in these funds, as well as some of the funds that these LP bases are almost entirely comprised of by high net worth Bitcoiners who effectively want Bitcoin at a discount… By doing some due diligence on this, we are sure that these are actually people with diamond hands who wanted to accumulate at a discount.”
According to Thorn, the last group to receive BTC from Mt. Gox is crypto exchange Bitcoinica. Thorn says the exchange is prepared to raise 10,000 BTC, but notes that Bitcoinica cannot sell its Bitcoin hoard immediately because it needs to go through the bankruptcy process in New Zealand.
In total, Thorn estimates that 64,000 BTC will be disbursed to lenders’ trading accounts. The Galaxy executive believes that these entities are the first Bitcoiners who are more likely to keep their stacks rather than selling upon receipt.
“In general, I don’t think there will be much sales. That’s what it all boils down to. Or at least I should say that I think there will be a lot less selling than a naive glance at the title suggests.”
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