The repayment of Bitcoin (BTC) by Mt. Gox is a significant event in the crypto space, as many investors will get their investments back. However, the market is fearful and expects it to impact Bitcoin prices due to the additional liquidity entering the market.
In the upcoming days, Mt. Gox will begin the repayment process and pay its users $9 billion worth of BTC.
The Tokyo-based bitcoin exchange Mt. Gox collapsed in 2014 after encountering a huge hack. At that time, the management lost control over the accounting processes, resulting in the suffering of creditors. At present, the repayments will take place, providing relief to long-suffering creditors.
Moreover, the court-appointed trustee in order of the exchange's bankruptcy proceedings recently announced that repayment to approximately 20,000 creditors would begin in July 2024.
When Mt. Gox collapsed in February 2014, the BTC price was at roughly $600. At the time of writing, it was trading at $60,924. The BTC price advanced by more than 10,000% in the last 10 years.
With over 140,000 BTC being distributed, this could probably add selling pressure to the market, as early investors might be inclined to sell at slightly a part of their holdings. Market analysts are divided on the potential impact.
Some predict that fewer coins will be distributed than anticipated, which might cause less selling pressure than the market expects. Others foresee a multi-billion-dollar cascade due to the upcoming market pressures, including the Mt. Gox repayments.
In the past, substantial liquidity events have led to advanced volatility in Bitcoin prices. For example, the liquidity crisis following the collapse of FTX and Alameda resulted in a decrease in liquidity and advanced price volatility.
An expansion in the Global Liquidity Index (GLI) often connects with a rise in Bitcoin’s price, suggesting that higher global liquidity supports investment in cryptocurrencies
At the time of writing Bitcoin was trading at the price of $60,924 with an intraday drawdown of 2.65%. At press time BTC market cap stands at $1.2 Trillion with a 24-hour trading volume of 22.6 Billion.
On the daily technical chart, the BTC price is facing weakness. The price is trading below the key exponential moving averages of 20 and 50-day suggesting weakness.
The forthcoming Mt. Gox Bitcoin repayments mark a pivotal moment for the crypto space. As investors anticipate the release of around $9 Billion worth of Bitcoin, the potential for increased liquidity and selling pressure looms. While the long-term impact remains skeptical, historical events suggest that such events can lead to heightened market volatility and price fluctuations.
