Each day, Coinrule will run through the state of the digital assets market for Blockbeat, your home for news, analysis, opinion and commentary on blockchain and digital assets.
Mt. Gox, the first major Bitcoin exchange based in Japan, was moving up to 70% of all Bitcoin volumes in its heyday. When it was hacked in 2014, thousands of customers lost access to their funds. After many years of legal haggling, bankruptcy administrators managed to find and recover large amounts of the stolen Bitcoin. The defunct exchange now holds more than enough to refund customers and creditors. This week, Mt. Gox moved all its 141,686 Bitcoin, worth approximately $9.6 billion, to new wallets in preparation for repayments. The day that many early Crypto users have been waiting for is coming. The repayment deadline for Mt. Gox is Oct 31, 2024.
Depending on timings, this could impact markets this year. Unlike FTX customers who will get refunded based on the dollar value of their holdings at the time of the collapse, Mt. Gox customers will be refunded in-kind with actual Bitcoin. This outcome is significantly more customer-friendly. It means that most former customers will receive a significantly larger amount in USD value than they had 10 years ago. Bitcoin’s price has increased more than 300x since 2014. For traders this could be bad news. Markets expect some sell pressure to emerge. The assumption is that at least some of the former Mt. Gox customers will take profits on funds they had considered lost 10 years ago.
The pressure could be exacerbated by a similar refund for Gemini Earn customers. Gemini Earn launched in 2021 and allowed its customers to loan crypto to now-bankrupt lender Genesis. Genesis filed for bankruptcy in the wake of the collapses of crypto hedge fund Three Arrows Capital and exchange FTX in 2022. In a lawsuit, Genesis, that is part of bigger Digital Asset Group, has agreed to refund Gemini Earn customers $1.1 billion. The funds will equally be returned in-kind in cryptocurrency rather than in US Dollar to Gemini Earn customers.
On the face of it, additional supply entering the market is bearish. But the main question is if holders are indeed planning to sell. There is currently no information on the exact repayment schedules. If refunds happen gradually, sell pressure might be lower. If markets continue to go up, many refunded customers might decide to hold their Bitcoin rather than selling it. Furthermore, many of the Mt. Gox customers are original Bitcoiners from the early days. The hodl ethos is strong in that group. If markets can absorb over $10 billion in new supply without tanking, it would in fact be a very promising sign for the prospect of the current bull market.