Mt.Gox transfers nearly 10 billion US dollars of BTC. Is the market crash really coming?

On May 28, Mt.Gox's continuous large-value BTC transfers caused a certain amount of market panic.

According to Whale Alert, as of 14:11:04 Beijing time, Mt.Gox has transferred a total of 141,658 BTC (about 9.6 billion US dollars). This is the first time since 2018 that a large amount of assets have changed in the Mt.Gox wallet address.

Axler Adler Jr, a researcher at CryptoQuant, said on X that “all funds in the Mt. Gox cold wallet have been transferred to a new wallet: the address starting with 1JbezD currently has a balance of 141,000 BTC.

According to Mt. Gox's creditor compensation plan, Mt. Gox needs to distribute its 142,000 BTC and 143,000 BCH to creditors before October 31, 2024.

As the Mt.Gox compensation deadline approaches, large BTC transfers to its wallet address may be seen as a prelude to a sell-off, and BTC briefly fell below $68,000.

According to the official announcement of Mt. Gox, Mt. Gox confirmed that the transfer of Bitcoin was in preparation for the creditor repayment deadline on October 31.

10 years after its collapse, Mt. Gox's compensation plan is still ongoing

In 2014, after more than 800,000 BTC were stolen, the Japanese cryptocurrency exchange Mt. Gox closed down and entered bankruptcy protection.

Ten years after its bankruptcy, Mt. Gox's compensation plan is still in progress. In September 2023, Mt. Gox extended the deadline for basic repayment, early lump-sum repayment and mid-term repayment, which was originally scheduled for October 31, 2023, to October 31, 2024.

According to Mt.Gox's balance sheet in 2019, Mt.Gox needs to repay 142,000 BTC, 143,000 BCH and 69 billion yen (US$510 million) to creditors.

According to Mt.Gox's repayment announcement in 2023, Mt.Gox provided creditors with two repayment plans: basic repayment and proportional repayment.

In the basic repayment, the first 200,000 yen claimed by each creditor will be paid in yen. In the proportional repayment, creditors can choose between two methods, namely "early lump sum repayment" or "mid-term repayment and final repayment".

In the early lump sum repayment method, the portion exceeding 200,000 yen allows creditors to choose a mixture of BTC, BCH and yen, or pay the full amount in legal currency.

For "mid-term and final repayments" that are larger than the lump-sum repayment amount, you will have to wait longer. Repayments of a higher proportion will also require waiting for the results of the lawsuit, which is expected to take up to 5-9 years.

In 2023, after the Mt.Gox compensation window opened, Mt.Gox entered the formal repayment stage.

In mid-November 2023, Mt. Gox bankruptcy liquidator Nobuaki Kobayashi informed users by email that he was working hard to start cash repayments within 2023. According to a creditor document of Nobuaki Kobayashi, he redeemed 7 billion yen (worth approximately 46.9 million US dollars) from the bankruptcy trust on November 17 for subsequent compensation operations.

Soon after, in December 2023, several creditors, including Yuzo Kano, the founder of Japan's leading exchange bitFlyer, stated on social media that they had received partial compensation, and this part of the compensation was in the form of Japanese yen and did not involve compensation in tokens such as BTC.

In January 2024, a Polish and Japanese creditor also said it received repayments, saying 80% of its claims were returned in U.S. dollars via bank transfers.

During this period, there was no unusual movement in Mt. Gox's on-chain wallet.

Mt.Gox wallet has changed for the first time in 5 years. Is a crash really coming?

Mt.Gox’s huge BTC compensation plan is seen as the sword of Damocles in the crypto market.

The twists and turns of Mt.Gox's compensation dynamics have caused a certain degree of market panic more than once. In December 2023, several Mt.Gox creditors revealed that they had received compensation, and perhaps affected by this news, the price of BTC also fell briefly afterwards.

However, unlike previous compensation dynamics, this time Mt. Gox involved the transfer of large amounts of BTC on the chain. Arkham Intelligence shows that Mt. Gox is transferring assets in its "cold wallet" for the first time since 2018. As of press time, it has transferred more than 140,000 BTC.

The last on-chain activity of a Mt. Gox-related wallet occurred on July 24, 2023, but the transaction only transferred a very small amount of BTC (about $1), and it was speculated that it was for checking address control permissions.

In addition, at the beginning of this year, some creditors also received compensation-related emails from Mt.Gox, which confirmed the BTC/BCH payment address to users and stated that Bitcoin would be unlocked in the next two months to pay creditors.

The deadline for Mt. Gox to pay compensation is set as October 31, 2024. In April 2024, more than a month before the current asset movement on the chain, Mt. Gox creditors also saw updates to their BTC and BCH claim amounts in the exchange's claim declaration system, and the update was also speculated to be an early payment from Mt. Gox to creditors.

According to the official announcement of Mt. Gox, Mt. Gox confirmed that the transfer of Bitcoin was in preparation for the creditor repayment deadline on October 31.

In April 2024, the cryptocurrency research organization K33 Research issued a report reminding crypto users that Mt. Gox was preparing to distribute approximately 142,000 bitcoins (BTC) and 143,000 bitcoin cash (BCH) to creditors, and that this huge amount of cryptocurrency release "may become a relevant negative price factor in the coming weeks."

The identities of the claimants cannot be made public due to Japan's bankruptcy proceedings, but many have disclosed some information to the media.

In November 2023, crypto media Protos mentioned in the article “Who owns MtGox claims to billions of dollars in bitcoin?” that MtGox claims are highly concentrated among the largest holders. Only 226 claimants own more than 50% of MtGox claims. These 226 claimants can receive 84,650 bitcoins.

The list of some of Mt. Gox’s largest known creditors is as follows:

• Mt. Gox Investment Fund (MGIF): As of March 8, 2023, MGIF is the largest creditor of Mt. Gox.

• Fortress Investment Group: Not to be confused with Fortress Trust, this group has made cash offers to Mt. Gox claimants.

• Kraken: Kraken’s Jesse Powell, who previously served as an advisor at Mt. Gox, created a portal for thousands of victims to submit claims. Many of the smaller Mt. Gox claims were consolidated through Kraken.

• Tibanne: Claims to own up to 88% of Mt.Gox.

• CoinLab: claims that Mt. Gox owes it at least $170 million and potentially up to $16 billion. In 2019, CoinLab increased one of its lawsuits to $16 billion, disputing its revenue-sharing agreement with Mt. Gox. Its $16 billion claim far exceeds the combined claims of all other creditors and exceeds all assets held by the Mt. Gox bankruptcy trustee. The settlement figure for the lawsuit is uncertain.

• Jed McCaleb: Probably owns 12% of Mt. Gox.

• Bitcoinica: Demands $29 million.

• Roger Ver: Claims that 577 bitcoins are personally lost.

Protos said that the two major creditors, Bitcoinica and MGIF, together hold about 20% of the claims. In February 2023, they agreed to receive about 70% of the payment in Bitcoin to ease concerns about sudden sales orders. MGIF later reiterated that it would not sell Bitcoin immediately.

The current price of Bitcoin has reached $68,000, which is dozens of times higher than the less than $1,000 in 2014. As the new phase of compensation begins, will Mt. Gox sell BTC to obtain repayment funds, or will the creditors who have received BTC repayment immediately sell their chips?

Alex Thorn, head of research at Galaxy, said on the X platform that he expects most BTC to be held. But K33 Research reminds crypto users that while creditors are unlikely to sell repaid Bitcoin en masse, and repayment is not necessarily equivalent to selling pressure, creditors may choose to continue holding, but this may be an important factor that makes the market uneasy in the short term.