The recent transfer of over $9 billion worth of Bitcoin from Mt. Gox, the defunct cryptocurrency exchange, has caused significant market volatility and raised concerns about the potential impact on the price of Bitcoin. This movement marks the first substantial on-chain activity from Mt. Gox-related wallets in over five years, ahead of the October 2024 deadline for repaying creditors affected by the exchange's collapse in 2014.
Mt. Gox, once the largest Bitcoin exchange in the world, suffered a catastrophic hack in 2014, resulting in the loss of approximately 750,000 BTC of customer funds and 100,000 BTC of its own holdings. The exchange subsequently filed for bankruptcy, and a lengthy legal process began to determine how to compensate victims.
On May 28, 2024, Mt. Gox's cold wallet transferred 12,240 BTC, worth around $840 million at current prices, to a new wallet address. Following this initial transfer, over 141,000 BTC worth about $9 billion completely moved from Mt. Gox's well-known cold wallet to a single new address.
The transfer caused Bitcoin's price to drop below $68,000, marking a roughly 2.5% decline. However, some market participants believe the impact on prices may be limited, as creditors who receive the BTC are likely to be early Bitcoin adopters and long-term holders.
According to Alex Thorn, the head of research at Galaxy Digital, creditors will hold onto the majority of the transferred bitcoin rather than selling it right away. He suggests the movement may be a consolidation before the coins are sent to custodians like BitGo, Kraken, and Bitstamp.
The trustee overseeing the repayment process has extended the deadline to October 2024, allowing creditors to choose between receiving compensation in fiat currency or directly in Bitcoin. Those opting for BTC will receive a fraction of their original deposits, but the value of these coins has increased significantly since the exchange's collapse.
While the sales of Bitcoin by Mt. Gox to acquire fiat for creditor repayments should already be complete, the impact on Bitcoin's price appears to have been minimal. This raises questions about whether the selling pressure has truly ended.
The Mt. Gox saga has been a long and complex one, with creditors awaiting compensation for nearly a decade. The latest developments, including the transfer of billions in Bitcoin and the upcoming repayment deadline, are sure to have a significant impact on the crypto market in the coming months.
