Mt. Gox announces repayment, triggering a continuous market decline?
Recently, the market has remained sluggish, and BTC once fell below the $60,000 mark. Many in the industry believe this is related to the announcement by Mt. Gox on June 24 regarding compensation for BTC and BCH from that year, which has created selling pressure.
A document displayed on the official website on the afternoon of June 24, stating that "the preparations for the Mt. Gox compensation are ready, and the necessary information exchange and confirmation with relevant exchanges have been completed," triggered panic in the market, leading to a subsequent market decline.1. The Rise and Fall of Mt.Gox
1.1 Background
Mt.Gox was established in 2010 as a website for trading World of Warcraft game cards. With the rise of Bitcoin, founder Jed McCaleb transformed it into a Bitcoin exchange platform. At that time, the Bitcoin market was still in its infancy, lacking mature trading mechanisms and regulatory measures. Mt.Gox quickly attracted a large number of users due to its early market positioning, becoming the largest Bitcoin exchange platform in the world.
1.2 Dark Times
However, the good times did not last long. In February 2014, Mt.Gox announced that 850,000 Bitcoins had been stolen due to a hacker attack, worth approximately $480 million. This incident shocked the world and led Mt.Gox into bankruptcy. The hack caused significant losses for Mt.Gox's users and plunged the entire Bitcoin market into a prolonged slump lasting several months.
1.3 Bankruptcy Liquidation
Following the hacking incident, Mt.Gox immediately filed for bankruptcy protection and began the liquidation process. The bankruptcy trustee was responsible for handling Mt.Gox's debt issues, including compensation for the victims. However, due to the enormous amounts involved, the compensation process had not made substantial progress until recently, when new breakthroughs occurred.
2. Repayment Plan
After multiple negotiations and preparations, they finally announced a specific repayment plan this year, aimed at compensating affected creditors for the losses incurred due to the platform's bankruptcy. According to documents disclosed earlier on the official website, the Mt.Gox trustee stated that the repayment of BTC and BCH would begin in early July. Currently, these preparations have been completed, and the necessary information for repayment has been exchanged and confirmed with relevant exchanges.
Specifically, Mt.Gox will repay a total of 142,000 BTC (approximately $8.72 billion) and 143,000 BCH ($50.76 million) to creditors, totaling about $8.77 billion in selling pressure. Shortly after this news was announced, the market reacted and began to decline. In fact, as early as the early morning of May 28, the previously inactive Mt.Gox wallet transferred 141,685 Bitcoins in 10 transactions to an unknown address.
Mt.Gox seems to have been aware of the potential market risks posed by the massive selling pressure. In its official announcement, the repayment plan for creditors is divided into two parts: basic repayment and proportional repayment. The basic repayment stipulates that the first 200,000 yen each creditor can receive will be paid in yen. As for the proportional repayment, creditors can choose a one-time early repayment or opt for installment payments in mid-term and final repayments.
For amounts exceeding 200,000 yen, creditors can choose to be paid in a combination of BTC, BCH, and yen, or pay the full amount in fiat currency. If they choose a one-time repayment, creditors will only receive partial compensation. While the installment repayment method may take several years, it allows for more compensation. In terms of payment methods, creditors can freely choose between cash and cryptocurrency.
Additionally, due to the long time span, many creditors have sold their bonds to fund companies. Considering the potential interest rate cuts at the end of the year, some funds may not immediately sell these assets.
3. How to View the Subsequent Impact?
Although the repayment plan for the Mt.Gox incident may bring a certain degree of selling pressure to the market, several reasons suggest that this selling pressure is unlikely to lead to a significant market downturn:
Decentralized Repayment Strategy: The Mt.Gox repayment plan employs a decentralized repayment strategy, allowing creditors to choose different repayment methods and timelines. This strategy helps alleviate selling pressure at a single point in time, enabling the market to digest these pressures more smoothly.
Gradual Release of Selling Pressure: Since the repayment deadline is set for October 31, 2024, creditors will need to make repayments over a longer period. This gradual release of selling pressure helps the market adapt progressively, reducing the risk of significant price fluctuations in the short term.
Market Expectations: Market participants have already anticipated the repayment plan for the Mt.Gox incident and have, to some extent, digested this news. Therefore, when actual repayments begin, the market may already be prepared, lowering the likelihood of significant price declines.
Other Market Factors: The cryptocurrency market is influenced by various factors, including global economic conditions, regulatory policies, and technological innovations. For instance, the upcoming U.S. elections and consumer price index later this year may have positive implications, which could offset some of the negative impacts from the Mt.Gox incident, keeping the market relatively stable.
Long-term Investors: Although there may be panic selling in the short term, long-term investors might see opportunities behind the Mt.Gox incident. As the market gradually stabilizes and recovers, these investors may buy on dips, thereby supporting market prices.
4. Conclusion
Whether it is FTX, Mt.Gox, or the recent theft incidents involving OKX and BN, all emphasize the importance of security. Such events have sparked opinions suggesting that self-custody wallets are safer than using exchange systems. However, in reality, situations like losing personal wallet keys or being hacked by malware are also common in the industry, and it is often difficult to seek redress.
4Alpha Group, as a professional asset management institution that has been deeply involved in the cryptocurrency asset management field for six years, has always emphasized that security and risk control are the primary considerations in asset management.
Undoubtedly, with the development of the industry and the listing of ETFs, the cryptocurrency sector is moving towards standardization and compliance. 4Alpha Group calls on all parties in the industry to work together to strengthen regulation and self-discipline, creating a safe and reliable investment environment for investors.
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