The Bitcoin price saw a significant drop this week, falling below $55,000 for the first time since February. This decline was attributed to the now-defunct Mt Gox exchange beginning to distribute billions in owed funds to creditors. Mt Gox recently announced that it has started repaying its creditors, putting an end to years of waiting since its collapse in 2014. The Japan-based exchange will be distributing around $9 billion worth of Bitcoin, Bitcoin cash, and fiat currency, putting added selling pressure on Bitcoin, which fell over 6% on Friday to trade near $54,000.
On Thursday evening, Mt Gox moved around 47,000 Bitcoin, valued at nearly $2.7 billion, from cold storage wallets to a separate address. While the intentions behind this transfer remain unclear, there are concerns that creditors may sell portions of the recovered coins, further impacting Bitcoin’s price. Mt Gox’s collapse in 2014 was the result of a massive hack that saw the loss of 850,000 Bitcoin, making it the largest crypto exchange at the time, handling 70% of all Bitcoin transactions.
The repayment of creditors by Mt Gox is a significant step towards resolving the exchange’s decade-long insolvency case. However, the influx of previously lost coins back into the market poses a threat to the supply and demand dynamics of Bitcoin. Some analysts believe that the selling pressure from these payouts could push Bitcoin’s price as low as $50,000 in the short term, while ongoing transfers from the German government have also weighed on the market. Despite this, others argue that the amounts being distributed are a small fraction of daily Bitcoin trading volumes and that most creditors are long-term investors who are unlikely to sell off their holdings all at once.
Despite differing opinions, it is widely expected that there will be significant volatility in the market in the coming months due to the Mt Gox distributions and the impending start of German government sales in July. This volatility is likely to result from the uncertainty surrounding how the recovered funds will impact Bitcoin’s price and overall market sentiment. As investors brace for potential fluctuations, it will be interesting to see how the market reacts to these major developments in the cryptocurrency space.
