Mt. Gox Bankruptcy Repayments Unlikely to Destabilize Bitcoin: UBS

Early adopters are likely to have remained crypto believers, and so they will choose to be paid in bitcoin and keep it, a report from the firm said.

AccessTimeIconMar 1, 2023 at 11:35 a.m. UTC
Updated Mar 1, 2023 at 3:05 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Creditors of crypto exchange Mt. Gox are about to recover some of their funds following a 10-year liquidation process, but concerns that large amounts of bitcoin (BTC) will be released onto the market are overdone, UBS said in a report Monday.

The “rehabilitation plan” gives creditors several options on how they are repaid and the timing of any repayment, the report said. The most important are whether to take an early lump sum or wait for more proceedings and further asset recoveries, and whether to receive the funds in fiat or crypto, the report added.

“The early lump-sum option with fiat repayments suggests that the exchange would have to sell BTC to raise the requisite cash,” strategists Ivan Kachkovski and James Malcolm wrote, noting the “long-held fear that Mt. Gox redemptions would hurt bitcoin’s price.”

While 850,000 bitcoins went missing from the exchange in 2014, it's not that amount that’s potentially being disposed of, because the exchange has recovered 142,000 BTC along with 143,000 in bitcoin cash (BCH) and 69 billion Japanese yen ($510 million), representing about 20% of the hack.

Still, the potential for the repayments to influence the price exists. That amount of bitcoin represents around 90% of average supply active within the last day and 28% in the last week. That’s significant because active supply increases are normally associated with weakness in the BTC price, the note said.

In reality, however, much less will come to market, as many early adopters are probably still crypto believers. Recent reports say two of the largest creditors, with a combined share of claims of 20%, have opted for the crypto payout, the bank said.

“New supply could still come to the market, but this at least implies it would be less concentrated,” it said. “Such news could have been an additional factor for BTC’s surprising resilience of late.”

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.

Author placeholder image

Will Canny is CoinDesk's finance reporter.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.