Mt. Gox to Release $9 Billion Worth of Coins: Implications Explained

A bitcoin exchange that collapsed a decade ago due to a hack is preparing to reimburse users with billions of dollars’ worth of the token, causing concern among investors.

Mt. Gox, the Tokyo-based exchange that went bankrupt in 2014 following a series of cyber thefts, is gearing up to repay nearly $9 billion to thousands of users. The heists resulted in the loss of approximately 650,000 to 950,000 bitcoins, valued at over $58 billion at current rates.

After a lengthy bankruptcy process marked by delays and legal battles, the court-appointed trustee overseeing Mt. Gox’s proceedings announced that distributions to its roughly 20,000 creditors will commence in early July. The reimbursements will be made in a combination of bitcoin and bitcoin cash, a derivative of the original cryptocurrency.

While this development brings relief to victims of the hack who have been waiting for restitution, the price of bitcoin experienced a decline to $59,000 last week, marking one of the steepest weekly drops in 2024 within the crypto market.

Experts interviewed by CNBC anticipate potential repercussions as roughly 141,000 bitcoins, equivalent to about 0.7% of the total outstanding bitcoins, are returned to Mt. Gox victims this week.

The collapse of Mt. Gox, once the largest bitcoin exchange globally, had a significant impact on the cryptocurrency market. Bitcoin’s value has surged from around $600 when Mt. Gox shuttered in 2014 to approximately $61,000 per coin today, translating to a remarkable 10,000% increase over the past decade.

Analysts foresee a considerable amount of bitcoin being sold off by Mt. Gox users looking to capitalize on their windfall. The influx of bitcoin into the market has raised concerns among investors, with fears of potential downward pressure on bitcoin’s price.

Recent events, such as the return of over $2 billion worth of bitcoin by Gemini exchange to its users, have demonstrated the influence of large fund redemptions on crypto prices. JPMorgan analysts anticipate Mt. Gox creditors to follow suit, leading to further market fluctuations in the coming months.

Despite the expected impact on bitcoin’s price, experts believe that the market has sufficient liquidity to absorb the potential sell-offs. They also suggest that the gradual release of funds to various recipients may mitigate immediate market disruptions.

While the Mt. Gox repayments may contribute to short-term market volatility, analysts point out that broader macroeconomic factors, including the Federal Reserve’s interest rate policies, are also influencing bitcoin’s recent price movements. Amid these uncertainties, the fundamental investment case for bitcoin remains strong, despite short-term fluctuations in the market.