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Treasurer of Mount Gox, Japanese Company Bitcoin Bitcoin Inc., which collapsed into bankruptcy a decade ago, said on Friday it had begun making payments in bitcoin and bitcoin cash to some of its creditors.
The announcement added that reimbursements to other users of the hacked exchange will be “immediately paid out” if they meet certain conditions, including undergoing account verification, as well as signing up for one of the designated digital asset exchanges through which the bankruptcy estate facilitates the exchange of digital currencies.
“We ask eligible rehabilitation creditors to wait for a period of time,” the statement added.
Bitcoin price has fallen by about 6% in the past 24 hours.
Customers of the Tokyo-based exchange have been waiting for 10 years to get their money back.
What is Mount Gox?
Mt. Gox was the world's largest cryptocurrency exchange, but it declared bankruptcy in February 2014 after a series of heists that saw up to 950,000 bitcoins disappear — worth more than $58 billion at today's prices.
Mt. Gox blamed the disappearance of bitcoin on a glitch in the cryptocurrency’s framework. Mt. Gox said that while users were receiving incomplete transaction messages when accessing the exchange, hackers may have illegally transferred the coins from their accounts.
After declaring bankruptcy, 140,000 missing bitcoins were recovered — meaning that roughly $9 billion worth of bitcoin would be returned to their owners, at today’s prices. Bitcoin was trading at around $600 at the time of the bankruptcy. Today, it is worth more than $54,000 — a gain of nearly 9,000%.
According to data from Arkham Intelligence, Mt. Gox moved billions of dollars worth of bitcoin from its cryptocurrency wallets on Thursday and Friday ahead of the payment notice.
More than 47,000 bitcoins worth $2.7 billion were moved from an offline cryptocurrency wallet linked to Mt. Gox, Arkham Intelligence said Friday.
According to Arcam, some of the funds, worth $84.9 million, were sent to Japanese cryptocurrency exchange BitBank, which is listed among the platforms that support payments for Mt. Gox users. Another $63.6 million in bitcoin was sent to an unknown party, which Arcam said was “likely to be a listed payment exchange.”
Mt. Gox wallets continue to hold 138,985 bitcoins, worth about $7.5 billion at current prices, according to Arkham, meaning billions of dollars in cryptocurrency remain unpaid.
How will this affect Bitcoin?
Analysts previously told CNBC they expect the Mt. Gox repayment plan to trigger a sell-off in bitcoin, though this is likely to be short-lived and precede further price gains later this year and in early 2025.
The windfall for Mt. Gox users will likely translate into massive bitcoin sales as investors look to lock in gains, John Glover, chief investment officer at crypto lending firm Ledn, told CNBC.
“It is clear that many investors will pull their money out and enjoy the fact that having their assets stuck in the Mt. Gox bankruptcy was the best investment they ever made,” said Glover, a former Barclays executive. “It is clear that some will choose to take the money and run.”
JPMorgan analysts said in a note last month that they expect Mt. Gox customers to sell some of their bitcoin to take advantage of the cryptocurrency’s massive gains.
“Assuming that most of the liquidations by Mt. Gox creditors occur in July, (this) creates a trajectory where crypto prices come under pressure in July, but begin to recover from August onwards,” they wrote.
Ultimately, the total amount owed to creditors — about 140,000 bitcoins — represents roughly 0.7% of the total 19.7 million bitcoins currently in circulation.
Analysts say this means that while it is likely to weigh on prices, there is enough liquidity available to cushion the blow of any heavy selling.
The amount of bitcoin traded on reputable exchanges each day this year suggests that “there is enough liquidity to absorb these sales over the summer months,” James Butterfill, head of research at CoinShares, told CNBC.
Jacob Joseph, research analyst at CC Data, reiterated this point, saying that the markets are able to absorb selling pressure.
“Moreover, a significant portion of creditors are likely to take a 10% discount on their holdings to receive early repayment, and not all holdings are set to be liquidated in the open market, reducing overall selling pressure,” he told CNBC via email.
