Ten Questions and Answers to Dispel the Rumors Surrounding the Mt. Gox Incident

Author: Azuma, Odaily Planet Daily

On the afternoon of June 24, Beijing time, a quick report about "Mt.Gox will start BTC and BCH repayments" triggered the market. Due to concerns about potential selling pressure, the already weak cryptocurrency market was further hit, with BTC briefly falling below the $60,000 mark and ETH nearing $3,200.

However, there remains considerable confusion and even rumors in the market regarding the Mt.Gox repayment event itself, to the extent that most readers are still unaware of the full picture of the event and cannot proactively assess its potential impact on the market. To dispel these doubts, Odaily Planet Daily will clarify this information in a Q&A format, combining market data and an interview with a creditor (dForce founder Mindao).

Q1: Is this the first debt repayment by Mt.Gox?

A1: No, as early as December 21, 2023, several users from the Japanese-speaking region reported on social media that they had received compensation in yen through PayPal, including Yuusuke Gana, the founder of Japan's leading exchange bitFlyer.

According to an email announcement from Mt. Gox's bankruptcy trustee Nobuaki Kobayashi at that time, this portion of compensation came from 7 billion yen redeemed from the bankruptcy trust by Kobayashi on November 17, 2023.

Q2: Why is this repayment so special?

A2: Because this is the first time Mt.Gox is repaying in BTC and BCH, which means that the 141,686 BTC (and a roughly equal 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, valued at approximately $8.54 billion.

Q3: When will the repayments take place ------ when will the selling pressure arrive?

A3: According to Nobuaki Kobayashi's latest email announcement, repayments will begin in July 2024.

Q4: The most critical question, what are the details of the repayments?

A4: Creditor Mindao stated that Mt.Gox will calculate each creditor's claim based on the BTC price at the time of bankruptcy (limited to those who chose to receive repayments in "physical" form, as some creditors opted for fiat currency repayments), and then allocate the BTC held according to the proportion of claims.

Considering that Mt.Gox lost a total of about 650,000 BTC, and currently holds 140,000 BTC, this means the recovery rate in BTC terms is about 21.5%. In simple terms, if you held 100 BTC at Mt.Gox back then, you can now only recover about 21.5 BTC. The BTC value has undoubtedly plummeted, but considering the hundreds of times increase in BTC over the years, the fiat value is a significant profit (equivalent to being passively locked in).

Odaily Note: Regarding the specific losses from the Mt.Gox hack, the exchange initially stated that it lost 850,000 BTC (750,000 belonging to customers, 100,000 belonging to the platform), but later Mt.Gox indicated that it found 202,185 bitcoins that were previously thought to be stolen, so the loss should be 650,000 BTC.

Q5: Why must the debt ratio be calculated based on the BTC price at that time?

A5: Essentially because of "insolvency," the amount of BTC currently held by Mt.Gox cannot cover its liabilities in BTC terms, making it impossible to repay 1:1 in physical form. This necessitates Mt.Gox to find a price to calculate the proportion of claims and allocate the current holdings. The specific price will depend on the ruling made by the Japanese court when reviewing the bankruptcy case.

Mindao also added that the users holding assets in Mt.Gox at that time did not only have BTC but also fiat assets, so Mt.Gox had to choose a specific currency as a basis for calculation ------ in fact, Mt.Gox used the yen price as the benchmark.

Q6: What was the BTC price at that time? What is the standard?

A6: The Tokyo District Court has previously made a liquidation ruling on the Mt.Gox bankruptcy case. According to Japanese bankruptcy law, 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 ------ the claim value for each BTC is fixed at 50,058.12 yen (approximately $314 at current exchange rates).

However, this price will only be used to calculate the proportion of creditors' claims and does not mean that each BTC held by creditors can only receive 50,058.12 yen. In fact, the final amount each creditor can receive per BTC will be much greater than this figure based on the proportion of claims.

Mindao added that when Mt.Gox was hacked in June 2011, the BTC price on the exchange briefly fell to $150, while the market price was around $300, meaning that users who bought BTC at the bottom in Mt.Gox that year could receive the maximum compensation "benefit."

Q7: How will creditors receive repayments?

A7: Earlier this year, creditors registered their receiving addresses, and they will receive payments through exchanges such as Kraken, Bitstamp, and Bitgo.

Q8: What are Mt.Gox's holding addresses? How to monitor liquidity?

A8: After the last aggregation on May 28, the BTC currently held by Mt.Gox is mainly stored in three addresses, each holding 47,230 BTC. The specific addresses are as follows:

1AsHPP7WcGnDLzxW2bUa2FcbJP3eZVEqpx;

16eAGJEjqsUqngMfcysQECvp7TMU37P9gX;

1HeHLv7ZRFxWUVjuWkWT2D5XFbXXvHoV68;

It is recommended to use the Mt.Gox wallet interface provided by Arkham for monitoring.

Q9: Who are the groups receiving repayments? Has the creditor structure changed over the years?

A9: There have been changes. The Mt.Gox hack incident occurred many years ago, and the related claims have been circulating in the market for a long time. Many original creditors, due to the need for early liquidation, have sold their claims to institutions specializing in bankruptcy compensation.

Galaxy's research director Alex predicts that about 20,000 BTC claims have been acquired by bankruptcy funds, and an additional 10,000 claims belong to the exchange Bitcoinica BK.

Q10: How to assess potential selling pressure?

A10: It depends on the selling expectations of the creditors after receiving repayments.

Mindao predicts that this matter has been ongoing for ten years, and the creditors are mostly early participants in the crypto space (diamond hands), and many claims have changed hands during this period, so the psychological impact may be greater than the actual impact.

Alex provided a similar prediction. Most of the institutions that have actively acquired Mt.Gox claims over the years are high-net-worth Bitcoin holders who prefer to accumulate positions at a discount rather than arbitrage through quick trading.

Alex further predicts that considering the poorer liquidity in the BCH market and the creditors' apparent lower faith in BCH compared to BTC, BCH's performance after the Mt.Gox repayments is also expected to be relatively poor.