Title: Mt.Gox Repayment: Clearing Up Confusion and Potential Impact on the Market
Author: Azuma
On the afternoon of June 24th, a news about “Mt.Gox to initiate BTC and BCH repayment” quickly sparked the market. Concerns over potential selling pressure further dampened the already weak cryptocurrency market, with BTC briefly falling below the $60,000 mark and ETH approaching $3,200.
However, there is still a great deal of confusion and even rumors surrounding the Mt.Gox repayment event itself, leaving many readers unaware of the full picture and unable to assess its potential impact on the market. In order to eliminate these doubts, Odaily has combined market data with an interview with the creditor (dForce founder Mindao) to clarify the information in a Q&A format.
Q1: Is this the first time Mt.Gox has repaid its debts?
A1: No, as early as December 21, 2023, several Japanese-speaking users claimed on social media that they had received compensation in the form of Japanese yen through PayPal, including the founder of the leading Japanese exchange bitFlyer, Yuzo Kano. According to an email announcement from the bankruptcy trustee Kobayashi Nobuaki, this compensation came from 7 billion yen redeemed by Kobayashi from the bankruptcy trust on November 17, 2023.
Q2: Why is this repayment special?
A2: It is special because this is the first time Mt.Gox has repaid its debts in the form of BTC and BCH, meaning that the 141,686 BTC (along with a similar amount of BCH) held by Mt.Gox will start flowing into the market. These BTC account for 0.72% of the total circulating supply of Bitcoin, with a value of approximately $8.54 billion.
Q3: When will the repayment take place, and when will the selling pressure come?
A3: According to the latest email announcement from Kobayashi Nobuaki, the repayment will begin in July 2024.
Q4: The most crucial question: what are the details of the repayment?
A4: Creditor Mindao stated that Mt.Gox will calculate the proportion of each creditor’s claim (limited to those who have chosen to receive repayment in “physical” form) based on the BTC price at the time of bankruptcy. Then, Mt.Gox will distribute the BTC it holds to different creditors according to their proportions. Considering that Mt.Gox lost a total of about 650,000 BTC, and currently holds 140,000 BTC, the BTC recovery rate is about 21.5%. In simple terms, if you had 100 BTC in Mt.Gox back then, you can only recover about 21.5 BTC now. While it is a significant drop in terms of BTC, considering the exponential increase in BTC’s value in recent years, it is still a profitable outcome in fiat terms (equivalent to passive hodling).
Odaily note: Initially, Mt.Gox declared a loss of 850,000 BTC (750,000 belonging to customers and 100,000 to the platform) in the hacking incident. However, Mt.Gox later stated that they found 202,185 BTC on the system that was previously considered stolen, so the actual loss is 650,000 BTC.
Q5: Why is the claim proportion calculated based on the BTC price at that time?
A5: Essentially, it is because the amount of BTC currently held by Mt.Gox cannot cover its debt in BTC terms. It is impossible to repay 1:1 in physical form. This means that Mt.Gox must find a price to calculate the claim proportion and allocate the current holdings accordingly. The specific price depends on the ruling made by the Japanese court during the bankruptcy proceedings. Mindao also added that at the time, Mt.Gox users held not only BTC but also fiat assets within the exchange. Therefore, Mt.Gox had to choose a particular currency as a basis for calculation, and in this case, it was the Japanese yen.
Q6: What was the BTC price at that time? What is the reference?
A6: The Tokyo District Court has already made a liquidation ruling in the Mt.Gox bankruptcy case. According to Japanese bankruptcy regulations, the value of Mt.Gox’s BTC claims will be calculated based on the price at the time of the company’s bankruptcy in April 2014, with each BTC valued at a fixed amount of 50,058.12 yen (approximately $314 at the current exchange rate). However, this price will only be used to calculate the claim proportion and does not mean that each BTC held by the creditors will only receive 50,058.12 yen. In reality, the final amount received per BTC by the creditors will be much higher, depending on the claim proportion.
Mindao further added that when Mt.Gox was hacked in June 2011, the price of BTC on the exchange dropped to as low as $150, while the market price at that time was around $300. This means that users who bought BTC at a low price on Mt.Gox could receive the highest compensation “profit”.
Q7: How will the creditors receive the repayment?
A7: The creditors have already registered their receiving addresses earlier this year, and the repayment will be made through exchanges such as Kraken, Bitstamp, and Bitgo.
Q8: What are Mt.Gox’s current holding addresses, and how can their flow be monitored?
Q8: After the last consolidation on May 28th, Mt.Gox currently holds its BTC mainly in three addresses, with each address holding 47,230 BTC. The specific addresses are as follows:
1AsHPP7WcGnDLzxW2bUa2FcbJP3eZVEqpx;
16eAGJEjqsUqngMfcysQECvp7TMU37P9gX;
1HeHLv7ZRFxWUVjuWkWT2D5XFbXXvHoV68;
It is recommended to use the wallet interface provided by Arkham to monitor them.
Q9: Who are the groups receiving the repayment? Has the creditor structure changed over the years?
A9: There have been changes. The Mt.Gox hacking incident has occurred for many years, and the related claims have been circulating in the market for a long time. Many original creditors, in order to cash out as soon as possible, have sold their claims to professional bankruptcy settlement institutions. Galaxy research director Alex predicts that around 20,000 BTC claims have been acquired by bankruptcy funds, and there are also 10,000 claims owned by the exchange Bitcoinica BK.
Q10: How can the potential selling pressure be assessed?
A10: It depends on the selling expectations of the creditors after receiving the repayment. Mindao predicted that since this incident happened ten years ago and the creditors are early participants in the crypto industry (diamond hands), and many claims have changed hands over the years, the psychological impact might be larger than the actual impact. Alex gave a similar prediction. Most of the institutions that have actively acquired Mt.Gox over the years are high-net-worth Bitcoin holders who prefer to accumulate positions at a discounted price rather than engage in quick trading for arbitrage. Alex also added that considering the lower liquidity of the BCH market and the lower belief in BCH among the creditors compared to BTC, it is expected that the performance of the BCH market after the Mt.Gox repayment will be relatively poor.
