Markets
Mt.Gox $9 Billion Redemption Starts Today! How will the cryptocurrency market react?
Bitcoin just returned to $63,350, a 4% jump that pares some of June’s losses. But can this really be called a return? Probably not; as sentiment towards Bitcoin and the broader cryptocurrency markets remains cautious.
A looming event threatens to shake up the cryptocurrency market again. What is it, and will it sink Bitcoin or create a buying opportunity? Read on to find out.
Concerns over Mt. Gox move
Investors fear a major liquidation event as the now-defunct Mt. Gox exchange begins distributing recovered tokens this week.
Mt. Gox, a once-major cryptocurrency exchange that went bankrupt a decade ago following a major hack, will begin distributing Bitcoin Refunds to creditors this week. These creditors, who have been waiting years for compensation, are set to receive about $9 billion in Bitcoin at today’s prices.
It’s been a long struggle
In 2011, Mt. Gox lost approximately 950,000 bitcoins in a hacker attack, a staggering amount considering Bitcoin’s then-record high value. $32 per BTC. Around 140,000 of these bitcoins were later recovered and are now worth around $9 billion, reflecting a massive increase in value.
From July to October, Mt.Gox creditors will receive 142,000 bitcoins, worth about $9 billion at current prices. Although there is an October deadline, JPMorgan analysts believe the majority of redemptions will occur in July.
Get ready for market pressure!
JPMorgan analysts suggest that some Mt. Gox creditors may sell some of their Bitcoin claims this month, potentially putting initial pressure on cryptocurrency markets.
This expectation is supported by a slight decline in JPMorgan’s Bitcoin Futures Position Indicator based on CME futures, which indicates that mainly retail clients, not institutional investors, have recently sold off cryptocurrency holdings.
What to expect now?
However, analysts expect the market to recover starting in August, partly due to upcoming cash refunds from another bankrupt cryptocurrency exchange. FTX.
FTX, another bankrupt cryptocurrency exchange, will also repay its creditors in the coming months, but these repayments will be in cash. Estimated at between $14 billion and $16 billion, these repayments are expected shortly after the final approval of FTX’s liquidation plan on October 7.
These funds could potentially support cryptocurrency markets, as native cryptocurrency creditors could reinvest their repayments into digital assets.
Will the Mt. Gox redemption cause a crypto sell-off or is this a buying opportunity? Share your thoughts.