Will Mt. Gox distributions crash the BTC price further?

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In July 2022, the Mt. Gox trustee posted an update that the trustee is “preparing to make repayments” in “accordance with the approved rehabilitation plan.” The trustee currently holds approximately 140,000 BTC, BCH and U.S.$500,000.

Creditors who previously filed claims can elect to receive 90% of what they are owed via an Early Lum-Sum Repayment (which could be somewhere between 15%-25% of what they actually held on the exchange) and also choose which assets would like to be paid back in BTC and/or BCH or cash.

No date is set for repayments to start, though the document did state that the “Setting of Assignment, etc. Restriction Reference Period” may start from the end of August in 2022. This period would prevent the assignment or transfer of claims “for safe and secure Repayments.” This August date could indicate that repayments could start in September, but technically the two dates are unrelated.

This update from the trustee manifests the question if these repayments will trigger another digital currency market sell-off, as victims of the Mt. Gox insolvency have been waiting eight years to get some portion of their money back. Other news sites are speculating that the repayments will or will not, based on subjective bias of those media outlets.

Of course, no one can predict what every single creditor will do, but likely some will be looking to get as much cash as possible leading to some potential downward pressure on the price. Notably, the trustee is only distributing BTC, BCH and cash, not any of the other “forks” (BSV, Bitcoin Gold etc.). These other “forks” will be liquidated for more cash for the Trustee to distribute. I spot checked the top 15 addresses or so on a Mt. Gox Cold Wallet Monitor and it appears the BSV has not yet been sold.

Regardless, it appears all Bitcoin variants will see further price reductions as we move forward in 2022 in an increasingly inflationary environment. As more and more funds and companies lay off employees, cut programs and report bankruptcies, the digital currency space appears less enticing for HODL’ing or speculation. Assuming half of the creditors HODL and half sell, then that would still imply 70K BTC and BCH being sold on the market.

Related, one of the biggest misconceptions about the controversial exchange is that it was hacked for 80,000 bitcoins back in 2011. Given the paltry 15-25% repayment rate creditors can receive, 80,000 unsplit bitcoins would be an increase of around 50% to the total funds held which would be a huge boon and could increase the repayment rate closer towards 30%. Why isn’t the trustee vehemently seeking recovery of these stolen funds?

Likely because the trustee has no legal claims to those funds in the first place, which dispels the unsubstantiated claim of a hack from convicted criminal Mark Karpeles. As repayments finally occur, truth and closure will finally manifest from this dark moment in Bitcoin’s history. Unfortunately, the digital currency space and economic environment are a lot different in 2022 than they were in 2014. If we can learn anything from Bitcoin’s history, it will be that no one can predict for sure what will happen.