Mt. Gox has announced the commencement of repayments to creditors, contrasting sharply with the surging Taiwan stock market as the crypto sector faces turbulent times. Bitcoin, in particular, has seen successive declines, breaching not just the $60,000 mark but plunging further below $55,000, sparking market concerns.
Bitcoin has been on a downward trajectory since June, with a 5% drop to $55,522 in the past 24 hours, and a significant 9.39% decrease over the past week, according to CoinMarketCap.
This recent Bitcoin downturn is likely tied to Mt. Gox’s announcement of beginning creditor repayments. Charles Edwards, founder of Bitcoin hedge fund Capriole Investments, noted on social media that a substantial amount of Bitcoin is moving on the blockchain, indicating Mt. Gox is preparing to initiate repayments.
Why is Bitcoin declining? Mt. Gox is set to repay.
Established in Shibuya, Tokyo in 2010, Mt. Gox was once the world’s largest Bitcoin exchange, handling over 70% of global Bitcoin transactions. However, in February 2014, Mt. Gox was hacked, resulting in a massive theft of Bitcoin, leading to bankruptcy protection in Japan on February 24, 2014. This left Mt. Gox owing over $9 billion in Bitcoin to 127,000 creditors.
It’s worth noting that Bitcoin was trading at less than $1,000 during that time.
After more than a decade, creditors have been awaiting compensation from Mt. Gox. Finally, on June 24th of this year, Mt. Gox announced plans to start repaying creditors in July, in the form of Bitcoin (BTC) and Bitcoin Cash (BCH).
However, isn’t receiving compensation a positive for investors? Why then does it affect Bitcoin and the crypto market negatively?
Analysts suggest that after waiting for over a decade to recover funds, many creditors may choose to liquidate their long-unused profits. Simply put, when investors sell their cryptocurrencies to cash out, it floods the market with Bitcoin, creating significant selling pressure and increasing market volatility.
In addition, earlier this year, German authorities seized 50,000 Bitcoins (then valued at $2.17 billion) from a suspect, with about 9,600 Bitcoins subsequently sold in June. Recently, Germany transferred 1,300 Bitcoins to cryptocurrency exchanges Kraken and Coinbase, and 1,700 Bitcoins to anonymous wallets, according to Miguel More, CEO of blockchain data tracking platform Arkham.
The impending large-scale sell-offs cast a shadow over the confidence in the future crypto market.
References: cointelegraph, coindesk