Mt. Gox bankruptcy trustee announces repayments – Bitcoin price collapses

After many years, the time has finally come: The bitcoins recovered from the collapsed exchange Mt. Gox will soon be returned to users. The market isn’t thrilled about it.

Oops. That was a candle, unfortunately in the wrong color—not joyfully green, but bitter red. Within minutes, the Bitcoin price fell from $63,000 to $61,000, and over the course of a few hours, it even dropped from $64,000, approximately a five percent decline.

Such movements rarely happen without reason, but seldom has the reason been so obvious: The trustee of Mt. Gox has, after years of waiting, announced the distribution of the recovered bitcoins (as well as Bitcoin Cash) announced.

After the trustee of the spectacularly bankrupt exchange in early 2014 managed to recover around 141,000 bitcoins, he has prepared „the repayments of Bitcoin and Bitcoin Cash.“ This process dragged on endlessly, with dozens of emails and announcements, leading many to believe it would never be completed. But „now these preparations are complete, and the trustee will initiate the repayments in Bitcoin and Bitcoin Cash.“ This will commence from July 2024.

141,000 bitcoins, at current prices, are (still) nearly nine billion dollars. This amount was withheld from the market for more than ten years as it rested in the wallets of the bankruptcy administration, which, in terms of money supply, is not much different from a relatively large ETF. Of course, Microstrategy holds more than 200,000, Blackrock just over 300,000, and Grayscale nearly 280,000 bitcoins. However, Fidelity, the issuer of one of the largest Bitcoin ETFs, holds 168,000 bitcoins, not far from the sum of the Mt. Gox coins.

141,000 bitcoins currently equate to more than what bitcoin miners produce in 10 months; it is almost as much as the halving reduces the annual production of new bitcoins. It is one of those amounts too large to be properly priced in, a factor with a similar hard, fundamental relevance as an increase in interest rates. It is hard to imagine that it won’t affect the price, not just through the red candle of the announcement shock but on a deeper, more mechanical, more persistent level.

However, whether and how it does depends significantly on how the people receiving the bitcoins handle them. Many will be early adopters who traded on Mt. Gox as early as 2013 or before, and few would have left all their coins on the exchange. One can assume that they are not relying on the repayment to pay their rent and that many of them will likely be content just holding them in their wallets. But all of this is open and will slowly be clarified starting in July. What is clear, however, is that today a new, rather negative factor has emerged that will almost inevitably shape the market.