- Mt. Gox bankruptcy case to distribute significantly fewer Bitcoins, reducing expected market sell-off pressure.
- Only about 6,500 Bitcoins will go to individual creditors, much lower than the 141,868 Bitcoins previously reported.
- Bitcoin Cash to face greater sell-off pressure due to lower liquidity compared to Bitcoin.
Alex Thorn, the research director at Galaxy, recently stated on platform X that the final token distribution in the Mt. Gox bankruptcy case will be significantly less than anticipated. This development suggests that the Bitcoin sell-off triggered by Mt. Gox will also be less severe than expected.
creditors have been stuck in mt gox bankruptcy for 10+ yrs–finally trustee says in-kind distribution of #BTC #BCH will begin in july. we think fewer coins will be distributed than people think & that it will cause less #bitcoin sell pressure than market expects
— Alex Thorn (@intangiblecoins) June 24, 2024
here's why
Thorn’s analysis highlights that Mt. Gox lost approximately 940,000 Bitcoins, valued at $424 million at the time of the bankruptcy. To date, 15% of these funds, equivalent to 141,868 Bitcoins, have been recovered. Based on these figures, it is estimated that about 95,000 Bitcoins will be used to pay claims.
Of these, around 20,000 Bitcoins will be allocated to the claim fund, 10,000 Bitcoins to Bitcoinica BK, and the remaining approximately 6,500 Bitcoins will be distributed to individual creditors. This figure is significantly lower than the 141,868 Bitcoins previously reported by the media.
Analysis of Token Distribution
According to Thorn, creditors in the Mt. Gox bankruptcy case, who have been waiting for over a decade, will finally begin to receive in-kind distributions of Bitcoin (BTC) and Bitcoin Cash (BCH) starting in July.
However, the number of coins distributed will be less than what people have been expecting, leading to less market pressure from Bitcoin sales than anticipated. Thorn’s estimates are based on reviewing bankruptcy filings, consulting with creditors, and a variety of assumptions.
On May 13, Thorn provided a detailed note to clients and counterparties of Galaxy, summarizing the figures. The recovered 141,868 BTC, valued at around $63.9 million at the time of recovery, now hold a value of approximately $9 billion, indicating a 140x gain for creditors in USD terms. For those opting for an early payout, creditors accepted around a 10% haircut, with about 75% of BTC choosing this option, leaving approximately 95,000 Bitcoins for early payment.
Breakdown of Claims
Of the 95,000 Bitcoins reserved for early payout, approximately 20,000 Bitcoins are owed to claims funds, and 10,000 Bitcoins are allocated to Bitcoinica BK. This leaves around 65,000 Bitcoins for individual creditors, a figure significantly lower than the 141,868 Bitcoins often cited in the media.
Despite the reduced distribution, several factors suggest that individual creditors may hold onto their coins longer than the market expects. Many of these creditors are long-term Bitcoin enthusiasts who have resisted compelling offers from claims funds over the years, indicating a preference for retaining their coins over a USD-denominated payout. Additionally, the capital gains tax impact of selling would be significant due to the substantial appreciation in Bitcoin’s value since the bankruptcy.
Impact on Bitcoin Cash
Bitcoin Cash (BCH) is expected to fare worse than Bitcoin from the Mt. Gox distributions. No creditor originally purchased BCH; it was recovered because Mt. Gox used its BTC keys to claim the fork that occurred years after the bankruptcy.
BCH liquidity is considerably lower than BTC, with only $400,000 liquidity on order books within 1% of the market price. The liquidity is even thinner on exchanges where individual creditors will receive their coins, such as Kraken and Bitstamp.
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