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

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

According to Whale Alert monitoring, 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 Mt.Gox wallet addresses have seen large-amount asset changes.

Axler Adler Jr, a researcher at CryptoQuant, said on X that "all funds in Mt.Gox's cold wallet have been transferred to a new wallet: the current balance of the address starting with 1JbezD is 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 transfers of BTC in its wallet address may be seen as a prelude to a sell-off, and BTC has fallen below $68,000 for a short time.

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

10 years after its closure, Mt.Gox's ongoing compensation plan

After more than 800,000 BTC were stolen, the Japanese crypto exchange Mt. Gox announced its closure and entered bankruptcy protection in 2014.

Ten years after its closure, Mt. Gox's compensation plan is still ongoing. In September 2023, Mt. Gox extended the deadline for basic repayments, early lump-sum repayments and mid-term repayments, originally scheduled for October 31, 2023, to October 31, 2024.

According to Mt.Gox's balance sheet in 2019, Mt.Gox needs to repay creditors 142,000 BTC, 143,000 BCH and 69 billion yen (5.1 100 million US dollars).

According to the repayment announcement of Mt.Gox in 2023, Mt.Gox provides 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 two methods, namely "early lump-sum repayment" or "mid-term repayment and final repayment".

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

For "mid-term repayment and final repayment" with a larger amount than the lump-sum repayment, it will take longer to wait. Higher proportion repayments will also require waiting for the results of the lawsuit, which is expected to take 5-9 years.

In 2023, as 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 in 2023. According to a creditor document of Nobuaki Kobayashi, he had 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 top exchange bitFlyer, stated on social media that they had received partial compensation, and this part of the compensation was in the form of yen, and did not involve compensation for tokens such as BTC.

In January 2024, a creditor in Poland and Japan also said they had received repayment, saying that 80% of their claims were returned in US dollars via bank transfer.

During this period, Mt. Gox's on-chain wallet did not change.

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

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

Mt.Gox's tortuous 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 the price of BTC subsequently fell briefly due to this news.

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 the first to transfer assets in the "cold wallet" since 2018. As of press time, more than 140,000 BTC have been transferred.

The last Mt.Gox-related wallet chain dynamic occurred on July 24, 2023, but the transaction only transferred a very small amount of BTC (about $1), which was speculated to be to check the address control authority.

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 the user and stated that Bitcoin would be unlocked in the next two months to pay creditors.

Mt.Gox's payment deadline is set for October 31, 2024. In April 2024, more than a month before the on-chain asset changes, Mt. Gox creditors also saw updates to their BTC and BCH claims in the exchange's claims reporting system, and the update was also speculated that Mt. Gox would pay compensation to creditors in advance.

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

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

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

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

And here is a list of some of Mt. Gox's largest known creditors:

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

• Fortress Investment Group: Not to be confused with Fortress Trust, which has offered cash buyouts to Mt. Gox claimants.

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

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

• CoinLab: Claims Mt.Gox owes it at least $170 million and possibly up to $16 billion. In 2019, CoinLab increased one of its lawsuits to $16 billion, disputing a 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: May own 12% of Mt.Gox.

• Bitcoinica: Demands $29 million.

• Roger Ver: Claims 577 Bitcoins Personally Lost.

Protos said that Bitcoinica and MGIF, the two major creditors, jointly 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 less than $1,000 in 2014. With the start of a new phase of compensation, will Mt. Gox sell BTC to obtain repayment funds, or will creditors who have received BTC repayment immediately sell their chips?

Galaxy Research Director Alex Thorn said on the X platform that he expects most BTC to be held. However, K33 Research reminds crypto users that although creditors are unlikely to sell the repaid Bitcoin collectively, 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.