Bitcoin Shake-Up Expected from Mt. Gox $9B Payout, JPMorgan & CoinShares Forecast

Mt. Gox, once the largest Bitcoin exchange before its collapse in 2014, is gearing up to distribute around $9 billion worth of Bitcoin to its creditors. This development has caught the attention of analysts from JPMorgan and CoinShares, who foresee significant implications for the cryptocurrency. The collapsed exchange is on track to return approximately 141,000 BTC to users who lost their funds during its downfall.

The impending payout by Mt. Gox represents about 0.7% of the total 19.7 million Bitcoin currently in circulation, a substantial portion. James Butterfill, Head of Research at CoinShares, has expressed concerns about the potential market impact of this massive release of Bitcoin. He highlighted that the release of this Bitcoin reserve has long been a concern for those optimistic about BTC’s future. The market has shown sensitivity to news related to such events, with investors understandably anxious about the Trust’s decision to start selling in July.

John Glover, Chief Investment Officer (CIO) of Ledn, shares similar sentiments, envisioning a scenario where many creditors may choose to sell their Bitcoin to realize profits. He believes that for many, having their assets stuck in the Mt. Gox bankruptcy turned out to be a lucrative investment opportunity.

Moreover, the surge in the Bitcoin price since Mt. Gox’s closure is noteworthy, with the price skyrocketing from around $600 per coin in 2014 to over $63,200 today. In March 2024, Bitcoin even reached a high of $73,800, possibly attributed to the launch of Spot BTC ETFs in January.

JPMorgan analysts have also weighed in on the potential repercussions of Mt. Gox creditors liquidating their Bitcoin holdings. They anticipate that the sell-off could exert downward pressure on Bitcoin prices in the short term. According to JPMorgan analysts, assuming most liquidations by Mt. Gox creditors occur in July, it could lead to a trajectory where crypto prices face further pressure in July but start rebounding from August onwards.

The anticipation of these Bitcoin sales follows a similar pattern observed with Gemini, another crypto exchange that recently returned over $2 billion worth of Bitcoin to users in June. JPMorgan analysts drew parallels between the two events, noting that the return of funds from Gemini led to negative price movements as retail customers likely cashed out their Bitcoin profits.

In addition, both the German and U.S. governments have been involved in significant Bitcoin selloffs recently, with the German government offloading another 400 BTC to major exchanges. These selloffs have had a substantial impact on the Bitcoin price, causing fear, uncertainty, and doubt (FUD) in the market.

The announcement of Mt. Gox repayments alone pushed the BTC price down to $59,000 in June, indicating that the actual payout could potentially lead to further price declines. Miner capitulation has also increased due to a significant drop in hash price, suggesting the possibility of additional selloffs in the near future.