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Mt. Gox's Bitcoin Liquidation is Coming, Here's All You Need to Know

Cryptocurrency Aug 23, 2022 11:28AM ET
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By Vlad Schepkov

The 8-year-long saga over 850,000 Bitcoins lost by Mt. Gox back in 2014 may be coming to at least a partial closure as investors are set to get nearly 200,000 Bitcoin worth of payouts as early as next month. But not everyone in the community is cheering.

In fact, many traders are voicing serious concerns over what the “liquidation event” may mean for the price of the largest cryptocurrency – already down 55% YTD, and barely scraping by above the major $20,000 psychological level.

Why is this such a big deal? And what can you expect?

Mt. Gox, a formerly Tokyo-based cryptocurrency exchange, made a name for itself back in 2013 – as BTC had its “first run”, soaring from $15 to $1200 in under 10 months, Mt. Gox quickly became the world’s largest and premier trade processor.

Just a short time later, however, in February 2014, the company was in the news again, this time for different reasons – the exchange suspended all trading and withdrawals, and infamously announced it was “missing” nearly 850,000 of clients' Bitcoins.

The enraged users, as well as international law enforcement, quickly set off a hunt for the coins (worth about $480M, at the time), and managed to recover some 200,000 of them in one of Mt. Gox’s old wallets.

A long legal process ensued, but at last a redistribution plan was approved by 99% of creditors in November 2021 – In July 2022, after almost 9 more months of waiting, the redistribution trustee said it was nearing actual payouts.

What do traders fear?

Specifics of the payouts are few, but here’s what we know:

Following BTC’s forking off into BTC and BTC Cash, the contents of trustee’s wallet were adjusted accordingly. According to Mt. Gox’s latest report, it’s holding:

  • 141,686 BTC
  • 142,846 BTC Cash
  • Nearly 70B Japanese Yen (worth ~$513M)

Much of the bitcoins were bought in the $15 - $1200 range back in 2013, and it is safe to assume the long-beleaguered investors would be happy to finally cash out their newly possessed holdings.

This liquidation, and the effect of a big one-time sale on the price of BTC, is exactly the community’s major fear right now.

How much BTC is that?

Bitcoin is currently trading just above $21.5K a piece, meaning the entire trustee stash represents over $3B worth of liquidity.

As a point of reference, quick crunch of coinmarketcap.com historical data shows that daily trading volume average is ~$31B over the past year.

The most liquid day – $84.2B, the least - $13.74B.

As such, a full or even a major liquidation of trustee’s tokens could represent up to 10% of the asset’s average trading volume.

While the worst case scenario does raise some concerns, it remains to be seen how exactly the distribution process will look, and how many clients elect to liquidate right away.

As is the norm in the crypto-community, where there’s fear, there’s optimism too – some are calling the upcoming liquidation a non-event, deem the fears premature, and even see a buying opportunity.

One thing is for certain – Mt. Gox is still keeping Bitcoin investors glued to their screens, full 8.5 years after the company’s trading platforms went offline.

Mt. Gox's Bitcoin Liquidation is Coming, Here's All You Need to Know
 

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