Back in 2014 the last bear market was kicked off in style by the collapse of MtGox, the largest bitcoin exchange around at the time. Having topped out in a classic bubble at the end of 2013, the market was just looking for a reason to confirm its hunch that BTC was still badly overvalued. Gox closing its doors and taking 850,000 BTC with it did the job.
Since then Gox has continued to cast a long shadow. The recovery of 200,000 ‘mislaid’ coins held out some hope that users would one day get some money back, and indeed that has now – apparently against all odds – come to pass. (Under Japanese law typically everything would be sold to repay creditors rather than assets being distributed directly, but a special ruling has been made in this case after the crypto world reacted with dismay after the trustee cashed out a tranche and ostensibly crashed the market. Gox will now be dealt with as a civil rehabilitation case rather than a bankruptcy.)
Around $1 billion of funds are at stake – the balance of the 200k BTC left. These will now be distributed pro-rata to Gox holders who sign up with the online claim filing system that has been set up (see https://claims.mtgox.com/assets/index.html). The deadline for submissions is 22 October.
160k BTC incoming
The reason this is now featuring again in the crypto news is because, after the price drop that took place a couple of weeks, the crypto world is hyper-attuned to the impact of whales cashing out.
What will be the impact of 160,000 BTC being distributed to old holders? In BTC terms, they will receive just a sixth of what they lost, but the massive bull market of 2017 means they will probably break even in fiat terms.
Dire warnings have been given that these coins will flood and crash the market, and that is certainly possible. Many people may just want to pull out their capital and walk away. Others, naturally, with continue to hold. At this point in the market cycle, bitcoin is a gift – whatever the short-term fluctuations, the medium term looks good as BTC builds a solid base around $6k.
As ever, the most likely scenario lies between the extremes. There may be some impact on the market of sellers who just want their cash. But you also have to factor in a large number of bitcoiners who have stuck around since 2014, albeit with burned fingers, and are pleased to get this windfall. True believers will put it in cold storage and carry on hodling.
Inferno’s opinion: this event will be priced in long before the distribution takes place. With everything going on in the crypto world right now, old Goxers selling coins here and there will just be background noise against the broader signal.
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