Mt. Gox transfers nearly $10 billion in BTC, is a market crash really coming?

Author: flowie, ChainCatcher

Editor: Marco, ChainCatcher

On May 28, multiple large BTC transfers from Mt. Gox triggered some market panic.

According to Whale Alert monitoring, as of 14:11:04 Beijing time, Mt. Gox has transferred a total of 141,658 BTC (approximately $9.6 billion). This is the first significant asset movement from the Mt. Gox wallet address since 2018.

CryptoQuant researcher Axler Adler Jr stated on X, "All funds in the Mt. Gox cold wallet have been transferred to a new wallet: the address starting with 1JbezD currently holds 141,000 BTC."

According to Mt. Gox's creditor repayment plan, Mt. Gox needs to distribute its holdings of 142,000 BTC and 143,000 BCH to creditors by October 31, 2024.

As the repayment deadline approaches, the large BTC transfers from Mt. Gox's wallet address may be seen as a precursor to selling, with BTC briefly dropping below $68,000.

Currently, according to the official announcement from Mt. Gox, they confirmed that the transfer of Bitcoin is in preparation for the repayment deadline to creditors on October 31.

Ten Years After Bankruptcy, Mt. Gox's Repayment Plan Continues

After losing over 800,000 BTC, the Japanese cryptocurrency exchange Mt. Gox announced its bankruptcy and entered bankruptcy protection in 2014.

Ten years after its closure, Mt. Gox's repayment plan is still ongoing. In September 2023, Mt. Gox extended the deadlines for the basic repayment, early lump-sum repayment, and mid-term repayment originally set for October 31, 2023, to October 31, 2024.

According to Mt. Gox's balance sheet from 2019, Mt. Gox needs to repay creditors 142,000 BTC, 143,000 BCH, and 69 billion yen (approximately $510 million).

According to the repayment announcement from Mt. Gox in 2023, two repayment options are offered to creditors: basic repayment and proportional repayment.

In the basic repayment, the first 200,000 yen claimed by each creditor will be paid in yen. In the proportional repayment, creditors can choose between two options: "early lump-sum repayment" or "mid-term and final repayments."

In the early lump-sum repayment option, amounts exceeding 200,000 yen allow creditors to choose a mix of BTC, BCH, and yen, or to pay the full amount in fiat currency.

However, the "mid-term and final repayments," which exceed the lump-sum repayment amount, will require a longer wait. Higher proportions of repayment will also depend on the outcome of litigation, which is expected to take 5 to 9 years.

In 2023, after the Mt. Gox repayment window opened, Mt. Gox officially entered the repayment phase.

In mid-November 2023, Mt. Gox bankruptcy trustee Nobuaki Kobayashi informed users via email that efforts were being made to start cash repayments within 2023. According to a creditor document from Kobayashi, he redeemed 7 billion yen (approximately $46.9 million) from the bankruptcy trust on November 17 for subsequent compensation operations.

Shortly thereafter, in December 2023, several creditors, including bitFlyer founder Yuya Kanazawa, stated on social media that they had received partial compensation, all in yen, without involving BTC or other token compensations.

In January 2024, a creditor from Poland and Japan also reported receiving repayments, claiming that 80% of their claims were refunded via bank transfer in USD.

During this period, there were no unusual movements in Mt. Gox's on-chain wallet.

First On-Chain Movement from Mt. Gox Wallet in 5 Years, Is a Dump Really Coming?

Mt. Gox's massive BTC repayment plan is seen as a Damocles' sword over the cryptocurrency market.

The convoluted repayment dynamics of Mt. Gox have triggered a certain level of market panic more than once. In December 2023, several Mt. Gox creditors revealed they had received compensation, which may have influenced BTC prices to drop temporarily.

However, unlike previous repayment dynamics, this time Mt. Gox involved large on-chain BTC transfers. Arkham Intelligence indicated that this is the first transfer of assets from the "cold wallet" since 2018, with over 140,000 BTC transferred as of the time of writing.

The last on-chain activity related to Mt. Gox occurred on July 24, 2023, but that transaction only involved a very small amount of BTC (approximately $1), speculated to be for checking address control.

Additionally, earlier this year, some creditors received emails from Mt. Gox regarding compensation, confirming the BTC/BCH receiving addresses and stating that Bitcoin would be unlocked in the next two months for creditor payments.

The repayment deadline for Mt. Gox is set for October 31, 2024. In April 2024, just over a month before this on-chain asset movement, creditors saw updates to their BTC and BCH claim amounts in the exchange's claim declaration system, which was speculated to indicate that Mt. Gox would pay creditors in advance.

Currently, according to the official announcement from Mt. Gox, they confirmed that the transfer of Bitcoin is in preparation for the repayment deadline to creditors on October 31.

In April 2024, cryptocurrency research firm K33 Research released a report warning crypto users that Mt. Gox is preparing to distribute approximately 142,000 BTC and 143,000 BCH to creditors, and this massive cryptocurrency release "could become a negative price influence in the coming weeks."

Due to Japan's bankruptcy procedures, the identities of claimants cannot be disclosed, but many claimants have revealed some information to the media.

In November 2023, crypto media Protos mentioned in the article “Who owns MtGox claims to billions of dollars in bitcoin?” that Mt. Gox's claims are highly concentrated among the largest holders. Only 226 claimants hold more than 50% of Mt. Gox's claims. These 226 claimants can receive 84,650 BTC.

The list of some known largest creditors of Mt. Gox is as follows:

• Mt. Gox Investment Fund (MGIF): As of March 8, 2023, MGIF is the largest creditor of Mt. Gox.
• Fortress Investment Group: Do not confuse with Fortress Trust; this group has offered cash acquisitions to Mt. Gox claimants.
• Kraken: Kraken's Jesse Powell served as an advisor to Mt. Gox and created a portal for thousands of victims to submit claims. Many smaller Mt. Gox claims were consolidated through Kraken.
• Tibanne: Claims to own up to 88% of Mt. Gox's shares.
• CoinLab: Claims that Mt. Gox owes it at least $170 million, potentially up to $16 billion. In 2019, CoinLab increased its lawsuit to $16 billion, disputing the revenue-sharing agreement with Mt. Gox. Its $16 billion claim far exceeds the total claims of all other creditors and the total assets held by the Mt. Gox bankruptcy trustee. The settlement figure for this lawsuit remains uncertain.
• Jed McCaleb: Possibly owns 12% of Mt. Gox.
• Bitcoinica: Demands $29 million.
• Roger Ver: Claims to have lost 577 BTC personally.

Protos stated that among them, Bitcoinica and MGIF together hold about 20% of the claims. In February 2023, they agreed to receive about 70% of the payment in Bitcoin to alleviate concerns about sudden sell orders. MGIF later reiterated that it would not sell Bitcoin immediately.

Currently, the price of Bitcoin has risen to $68,000, compared to less than $1,000 in 2014, increasing by several dozen times. With the new phase of repayments opening, will Mt. Gox sell BTC to obtain repayment funds, or will the creditors receiving BTC repayments immediately sell their holdings?

Alex Thorn, head of research at Galaxy, stated on X that he expects most BTC to be held. However, K33 Research reminds crypto users that while creditors are unlikely to collectively sell the repaid Bitcoin, repayment does not necessarily equate to selling pressure; creditors may choose to continue holding, but this could be an important factor causing market unease in the short term.