The culprit behind the market's big dump? Ten questions and answers to dispel the rumors and fog of the Mt.Gox incident

Original | Odaily Planet Daily

Author | Azuma

On the afternoon of June 24th, Beijing time, a fast-moving news about the ‘Mt.Gox will initiate the repayment of BTC and BCH’ quickly sparked the market. Due to concerns about potential selling pressure, the already weak cryptocurrency market further weakened, with BTC once falling below the $60,000 mark and ETH also approaching $3,200 at one point.

However, there is still a lot of confusion and even rumors about the Mt. Gox repayment event itself in the market, so that most readers do not understand the whole picture of the event and cannot actively evaluate the potential impact of the event on the market. In order to dispel these doubts, Odaily Star Daily will combine market data and interviews with creditors (dForce founder Mindao) in a Q&A format to clarify this information.

• Q1: Is this the first time Mt.Gox has repaid its debts?

A1: No, as early as December 21, 2023, many Japanese users in the Japanese market had already claimed on social media that they had received compensation in the form of Japanese yen through PayPal, including the founder of Japan’s leading exchange bitFlyer, Yusuke Otsuka.

Based on the email notification from Nobuaki Kobayashi, the bankruptcy trustee of Mt. Gox, it can be inferred that this portion of compensation funds comes from the 7 billion yen redeemed by Nobuaki Kobayashi from the bankruptcy trust 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, it means that the 141,686 BTC (and a similar 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, worth approximately 85.4 billion dollars.

• Q3: When does repayment occur - when does selling pressure come?

A3: According to the latest email notice from Nobuaki Kobayashi, repayment will begin in July 2024.

• Q4: The most crucial issue, what are the details of the repayment?

A4: Creditor Mindao stated that Mt.Gox will calculate the proportion of each creditor’s claim based on the BTC price at the time of bankruptcy (limited to the group of creditors who have chosen to receive repayment in “physical” form, as some creditors have chosen to accept fiat currency repayment), and then distribute the held BTC to different creditors according to the proportion.

Considering that Mt.Gox lost a total of about 650,000 BTC back then, and currently still holds 140,000 BTC, this means that the recovery rate of BTC coins is about 21.5%. Simply put, if you held 100 BTC at Mt.Gox back then, you can now only recover about 21.5 BTC. The coin standard is undoubtedly a big dump, but considering the hundredfold increase in BTC in recent years, the fiat currency standard is a big profit (equivalent to passive lock-up).

Odaily Note: Regarding the specific losses of the Mt.Gox hacking incident, initially the exchange claimed to have lost 850,000 BTC (750,000 belonging to customers and 100,000 belonging to the platform). However, later on, Mt.Gox stated that they had found 202,185 bitcoins in their system that were previously thought to be stolen, so the actual loss should be 650,000 BTC.

• Q5: Why do we have to calculate the debt ratio based on the BTC price at that year?

A5: Essentially, it is because of insolvency. The amount of BTC currently held by Mt.Gox cannot cover its liabilities based on the 1:1 physical repayment, which means Mt.Gox must find a price to calculate the proportion of claims and then distribute the current holdings. The specific price depends on the decision made by the Japanese court when considering the bankruptcy case.

Mindao also added that at that time, the assets held by users in the Mt.Gox exchange were not only BTC, but also fiat currency assets, so Mt.Gox had to choose a certain currency as the basis for calculation - in fact, Mt.Gox used the yen price as the benchmark.

• Q6: What was the price of BTC back then? Based on what?

A6: The Tokyo District Court has previously issued a liquidation ruling on the Mt.Gox bankruptcy case. According to Japanese bankruptcy regulations, the BTC claim value of Mt.Gox will be calculated based on the price at the time of the company’s bankruptcy in April 2014 - the fixed value of each BTC claim is 50,058.12 Japanese yen (equivalent to approximately 314 US dollars at the current exchange rate).

However, this price will only be used to calculate the proportion of creditors’ claims, and does not mean that each BTC held by the creditors can only receive 50058.12 Japanese yen. In fact, the final amount that creditors can receive for each BTC is much greater according to the proportion of claims.

In addition, Mindao stated that before the bankruptcy of Mt.Gox in early 2014, the lowest price for BTC on Mt.Gox’s website once fell to $150, while the market price at that time was about $300. This means that users who bought the dip on Mt.Gox’s website that year could get the highest compensation ‘return’.

• Q7: How does the creditor receive repayment?

A7: The creditors have registered the receiving address at the beginning of this year, and will receive payments through exchanges such as Kraken, Bitstamp, Bitgo, etc.

• Q8: What is Mt.Gox’s holdings address? How to check its flow?

A8: After the last aggregation on May 28th, the BTC held by Mt.Gox is mainly stored in three addresses, each holding 47230 BTC. The specific addresses are as follows:

1AsHPP7WcGnDLzxW2bUa2FcbJP3eZVEqpx；

16eAGJEjqsUqngMfcysQECvp7TMU37P9gX；

1HeHLv7ZRFxWUVjuWkWT2D5XFbXXvHoV68;

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

• Q9: What are the groups that receive repayment? Have there been any changes in the debt structure over the years?

A9: There have been changes. The Mt.Gox hacker incident happened many years ago, and the related claims have been circulating in the market for a long time. Many original claimants, due to the need to cash out as soon as possible, have traded their claims to professional institutions engaged in bankruptcy compensation matters.

Galaxy research director Alex predicts that about 20,000 BTC claims have been acquired by the bankruptcy fund, in addition to 10,000 claims owned by the exchange Bitcoinica BK.

• Q10: How to evaluate potential selling pressure?

A10: Depends on the expected sale after the creditor receives repayment.

Mindao predicts that since this has been going on for ten years, the creditors are also early participants in the crypto world (diamond hands), and many of the creditors have changed hands during the period, so the psychological impact may be greater than the actual impact.

Alex gave a similar prediction. Over the years, the majority of institutions actively acquiring Mt.Gox are high-net-worth Bitcoin holders. They prefer to accumulate positions at a discounted price rather than engage in arbitrage through quick trading.

Alex’s additional prediction takes into account that the liquidity of the BCH market is worse and that creditors’ faith in BCH is clearly lower than in BTC. It is expected that BCH will perform relatively poorly after the repayment of Mt.Gox.