Mt. Gox Bankruptcy Case and Its Impact Analysis

The Japanese exchange Mt. Gox, established in July 2010, was once the largest trading platform in the cryptocurrency space, accounting for over 80% of the market's trading volume at one point. However, in 2013, the exchange suffered an incident where 850,000 bitcoins were stolen, leading to its eventual bankruptcy. In the years that followed, approximately 200,000 bitcoins were recovered, triggering a decade-long compensation lawsuit.

During the long waiting process, debt trading has become a common phenomenon. Many institutions and individuals are actively acquiring debt claims from Mt. Gox. For example, an investment group once acquired debt claims for each BTC at a price of $900 in 2019, which was twice the value of Bitcoin at the time of Mt. Gox's bankruptcy.

In 2021, Mt. Gox finally passed the compensation plan. According to this plan, creditors can receive about 23.6% of their original claims as asset compensation. If they choose a one-time early compensation, the compensation rate will drop to 21%. The compensation assets primarily consist of two parts: 5%-10% cash and 90%-95% Bitcoin. The cash comes from the BTC sold by the Japanese government during the peak period in 2017.

Regarding the compensation timeline, the five selected trading platforms will complete the distribution of BTC within a time frame ranging from 14 days to 90 days. It is worth noting that the deadline for a one-time advance compensation has been set for October 31, 2024.

In May 2024, BTC in the Mt. Gox cold wallet moved for the first time, causing panic in the market. On July 5, 47,000 tokens were transferred out of its account address, of which 1,545 BTC were transferred to a trading platform to begin compensation. This action, combined with other factors, resulted in a decline of over 8% in BTC price that day.

As of July 12, the Mt. Gox account address still holds 138,000 BTC, indicating that most of the selling pressure has not yet truly entered the market. The decline on July 5 may have been only a partial reaction of the market to expectations of future selling pressure.

Analysis shows that Mt. Gox creditors may not sell all the BTC they acquire. From a profit perspective, the original creditors' returns are around 24 times, and even institutions that acquired the claims later have returns exceeding 10 times. In addition, long-term bullish investors in BTC may prefer to continue holding.

If 75% of the creditors accept an early one-time compensation, the actual amount of BTC used for compensation will be approximately 94,117 coins. Depending on different selling ratios and times, the amount of BTC entering the market daily will vary.

Compared to the recent impact of a certain country's government selling BTC, the market pressure brought by the Mt. Gox compensation is quite significant. The government sold approximately 43,700 BTC within 23 days, causing a maximum daily drop of 19%.

Currently, the demand for BTC ETFs is not enough to completely offset the selling pressure. From June 19 to July 10, over 15 working days, the net inflow into ETFs was only $600 million, averaging about $43 million per day.

In summary, if the compensation from Mt. Gox is completed within a month, the market may face further declines. If the compensation period is extended to 2-3 months, although the daily selling pressure may not be significant, the expectation of sustained selling pressure may lead to a period of consolidation with fluctuations. It is noteworthy that the actual amount of BTC transferred to trading platforms from Mt. Gox is still very low, and large-scale distribution may trigger greater market volatility. Investors should closely monitor subsequent developments and assess risks reasonably.