Mt. Gox, once the largest exchange during the 2013 bull market, which ultimately left its users at a loss, is reportedly set to commence compensating its victims.
This news has stirred concerns among Bitcoin investors regarding potential adverse sentiments towards Bitcoin and the wider crypto market, due to the possibility of selling pressure from the recipients of the compensation.
Mt. Gox Begins Compensation Payouts
Mt. Gox, abbreviated from Magic the Gathering Online Exchange, formerly the largest Bitcoin trading platform in 2013, is said to be providing compensation to its clients. This compensation is the result of several hacking and fraud cases involving user funds, leading to the platform’s collapse in February 2014.
After a decade-long wait, victims are finally set to receive compensation, with a fund of $9 billion ready for distribution. The $9 billion fund will be allocated to victims who have provided all required information and documentation to Mt. Gox.
While it may not cover all victims, this fund serves as evidence that the ten-year process has not been in vain. The compensation will be distributed in three currencies: Bitcoin, Bitcoin Cash, and the Japanese Yen.
The use of Yen is because Mt. Gox originated in Japan, where, during its peak in 2013, it was not only used by Japanese traders and investors but also by those worldwide. It is reported that approximately 142,000 BTC, 143,000 BCH, and 69 billion Japanese Yen will be distributed among 127,000 victims.
Concerns arise due to the potential sale of 142,000 BTC and 143,000 BCH, as there is a possibility that recipients may convert their funds into their respective national currencies. Analysts are worried that this situation could lead to new selling pressure, resulting in negative sentiment towards Bitcoin and the crypto market as a whole. From the Bitcoin fund alone, there is a potential selling pressure of $9.37 billion, nearly reaching 1% of the current Bitcoin market capitalisation.
Bitcoin Faces Downward Pressure
The distribution of funds will be staggered and not completed in a single day; the current deadline stands at October 31, 2024.
However, there is already approximately 137,890.98 BTC ready for distribution, indicating the possibility of compensation being distributed earlier than the deadline.
This narrative could negatively impact the market sentiment, as concerns over potential selling pressure emerge.
Currently, most markets predict that this compensation will resemble an airdrop and will affect Bitcoin’s price similarly to an airdrop.
Typically, after an airdrop, the token’s price tends to decrease due to selling pressure from recipients looking to cash in their gains. Therefore, concerns are relatively high at present, though not significant enough to cause a drastic decline in Bitcoin’s price.
Although the situation appears grim, in reality, the Mt. Gox narrative is unlikely to have a significant impact on the market, as post-halving, market conditions remain relatively calm. The effects of the Mt. Gox news are more likely to be felt once payments begin.
Considering Bitcoin’s ongoing consolidation between $60,000 and $70,000, traders should remain cautious and utilise sound risk management strategies. Investors may also take advantage of this opportunity to buy when prices dip.
