- Selling pressure from the Mt.Gox selloff is yet to enter the Bitcoin market.
- Mt. Gox wallet still holds 138,000 Bitcoins.
- Not all disbursed Bitcoins would be sold by Mt.Gox investors.
Research analysts believe selling pressure from the Mentougou and Mt. Gox debacles has not yet fully entered the Bitcoin market. According to Cycle Capital, as of July 12, 138,000 BTC remained in the Mentougou account address.
The research firm highlighted that the selling pressure on July 5 was only a partial realization of the expected decline resulting from Mentougou.
Cycle Capital expects Mentougou creditors to sell some of their BTC after the exchange issues the scheduled refund. The research firm considered the accumulated profit on the Bitcoins, which could amount to about 120x at maximum. The firm noted that some creditors may have sold their debts at lower costs, amounting to 24x potential profit. Therefore, the partial sell-off may have come from those categories of holders, while institutions that bought the debts are likely to hold their coins longer.
For context, hackers stole 850,000 Bitcoins from the Mt. Gox crypto exchange in 2013, forcing the exchange into bankruptcy. A recovery attempt enabled the exchange to regain 200,000 of the stolen Bitcoins. After the recovery, a legal process ensued between Mt. Gox investors and a court-appointed trustee, after which the BTC custodians used 60,000 Bitcoins for fees. Hence, Mt. Gox will distribute the remaining balance of 140,000 during the refund exercise.
Notably, institutions have been purchasing debts from investors involved in the Mt. Gox debacle due to the lengthy repayment process. Fortress Investment Group offered investors $900 per BTC in 2019, double the price of Bitcoin when Mt. Gox went bankrupt. Creditors worried about being paid accepted the offer, even though it was much lower than Bitcoin’s price at the time.
Considering the dynamics involved, Cycle Capital suggests that the extent of Bitcoin’s selling pressure would depend on how long it takes Mt. Gox to execute its compensation plan. The firm believes that completing it within one month would cause BTC to drop further, while spreading the payments could trigger volatility in the Bitcoin market, slowing down the expected uptrend.
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