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Mt. Gox Repayments Trigger Bitcoin Slip - Buy Now?

Mt. Gox is set to return 140,000 BTC to hack victims as soon as July, causing Bitcoin's price to drop below $60K... But is this a selling or buying opportunity?

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Mt. Gox-related trepidation has kept the market anxious since the exchange lost 850,000 BTC through its infamous hack in 2014.

With fears that the eventual repayment to disgruntled customers would trigger a wide market sell-off lurking in the back of market participants' minds, the Mt. Gox saga has felt like a ticking time bomb for many.

Last month, the market caught wind of potential repayments being prepared by the Tokyo-based exchange when more than 140,000 BTC were transferred from Mt. Gox wallets to an unknown wallet through thirteen transactions.

72 different Mt. Gox-related wallets sent 141,686 Bitcoin to a new wallet, "1Jbez." According to trustee Nobuaki Kobayashi, the $9 billion worth of Bitcoin is part of the exchange's plans to repay creditors.

Mt.Gox Transfers $9B Bitcoin to New Wallet as Part of Repayment Plans
72 Mt. Gox-related wallets sent 141,686 BTC to a wallet named “1Jbez” - trustee Nobuaki Kobayashi confirmed the transfer was part of the exchange’s repayment plans

Mt. Gox, which derived its name from "Magic: The Gathering Online EXchange" as it began as a trading platform for the collectable card game, was responsible for over 70% of Bitcoin transactions back in 2014. That year, the platform suffered a hack in which it lost 850,000 BTC. At the time, its value was $450 million; it's now worth over $51 billion.

Blockcast EP 22 | Mt Gox’s Mark Karpeles on The Hack That Shaped The Crypto Industry
Mt Gox first launched in the summer of 2010 but suspended operations in February 2014 after 750,000 Bitcoins went missing

Yesterday, news surfaced that Mt. Gox is planning to distribute 140,000 BTC to hack victims as soon as July.

“The Rehabilitation Trustee has been preparing to make repayments in Bitcoin and Bitcoin Cash under the Rehabilitation Plan,” trustee Nobuaki Kobayashi said in a statement. “The repayments will be made from the beginning of July 2024."

Bloomberg ETF analyst highlighted how the repayment equates to more than half of ETF inflows. Around $9 billion worth of Bitcoin will be sold by October to repay customers, representing 60% of the total inflows into Bitcoin ETFs since their inception.

Consequently, Bitcoin's price slipped below $60,000 whilst its dominance (share of total crypto market value) fell by 1.8% to 54.34% - its biggest slip since January, percentage-wise.

Short-term Bitcoin put options on Deribit also rose to its highest level in four weeks.

New News But Old News

As mentioned, fears of Mt. Gox repayments triggering an instant sell-off have been ruminating in the market for a decade. But now the saga is seemingly reaching its climax, analysts are sceptical that the fears will actually be realised.

IG Markets analyst Tony Sycamore argues that Mt Gox-related selling pressure has already been priced into the current market. “The repayments have been coming for a long time,” he said.

“The repayments are happening against the backdrop of deteriorating market sentiment, technical selling, and outflows from the Bitcoin ETFs,” he continued, adding that speculative money has left crypto to chase equities like NVIDIA.

Crypto venture firm Framework Ventures' Vance Spencer echoed a similar message, stating, "Mt Gox distribution fud has been literally 10 years in the making, 140K BTC in total. Pretty telling we can't even nuke 20% from ATHs."

Yesterday wasn't the first case of Mt Gox-related FUD either. As recently as November 2023, news of Mt Gox repayments occurring "shortly" initially shook the market. You don't need us to tell you that Bitcoin recovered rather well since then.

Stay Calm, Push Buy

The Mt. Gox news hasn't exactly caught the market unawares. Bitcoin's price dip can instead be regarded as a knee-jerk reaction by short-term opportunists.

But don't take it from us, here's what our esteemed analysts at brn have to say about the matter:

"This impending sell-off is expected to exert downward pressure on Bitcoin's price in the coming months. However, the current downward trend appears to be losing momentum. Long-leveraged positions were liquidated yesterday, and many investors took advantage of the dip to buy rather than sell."

"The Put to Call ratio for Bitcoin is currently at 0.47, indicating a bullish sentiment as an increasing number of call options anticipate a significant rally in the latter half of 2024. Additionally, the liquidation heatmap reveals substantial potential for short squeezes, with over $7 billion worth of positions between the current price level and June’s high."

"We believe this level is a buying opportunity, as Bitcoin appears to be at or near its bottom before the next rally."


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