Mt. Gox Bitcoin selling pressure not as heavy as expected, mostly from long-term BTC holders

Old bankruptcy case of the Japanese exchange Mt. Gox notified creditors on 6/24 that Bitcoin (BTC) and Bitcoin Cash (BCH) will be distributed starting in July, causing market panic and selling pressure. Bitcoin fell below the $60,000 mark yesterday. However, Galaxy research director Alex Thorn believes that the selling pressure on Bitcoin is less than expected, so there is no need to worry too much.

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

here's why 👇

— Alex Thorn (@intangiblecoins) June 24, 2024

Mt. Gox Bitcoin Creditors Analysis

According to Galaxy's analysis on May 13th, Mt. Gox lost approximately 940,000 bitcoins and eventually recovered 15% of them, totaling 141,868 bitcoins. However, due to the increase in the price of bitcoin, which was $451 at the time of bankruptcy and evaluated at $63,500 on 5/13, creditors' profits increased by 140 times when calculated in US dollars.

If creditors choose to claim early, they can only receive 90% of the bitcoins with a 10% haircut. Galaxy expects that about 75% of the creditors will choose this option, meaning approximately 95,000 bitcoins will be paid out to the creditors in advance.

Among them, 20,000 bitcoins belong to the claim fund, 10,000 belong to Bitcoinica BK, and the remaining 65,000 belong to independent creditors.

Independent Creditors Favor Long-Term Bitcoin Holders

Thorn estimates that only 10% of independent creditors holding around 65,000 bitcoins choose to sell immediately, resulting in selling pressure of only 6,500 bitcoins. The reasons for this are:

• These independent creditors are early bitcoin adopters who are technically savvy, so they tend to favor long-term bitcoin holdings.
• They have resisted the fund's proposals over the years, indicating their desire to recover bitcoins rather than US dollars.
• With bitcoin priced in US dollars increasing by 140%, selling immediately would incur high capital gains taxes.

Thorn has also spoken with members of the claim fund and believes that the majority of these funds are seeking high net-worth traders at a discount for bitcoins, rather than credit funds engaging in arbitrage trading. Therefore, they are not in a rush to sell their bitcoins immediately.

Selling Pressure Expected to Be Small Compared to Market Expectations, Observing Arkham Data Flow

Thorn states that all bitcoins will be distributed to creditors' exchange accounts at Kraken, Bitstamp, or BitGo. Once the bitcoins are transferred to these platforms, it is expected to take between 24 to 72 hours for them to be credited to user accounts. Investors can observe the flow of Mt. Gox bitcoins by monitoring the analysis data from Arkham.