The head of research at crypto-financial services firm Galaxy is dispelling fears that Mt.Gox’s long-awaited refunds could trigger the collapse of Bitcoin (BTC).
In a new interview on the Unchained Podcast YouTube channel, Alex Thorn says defunct crypto exchange Mt.Gox will repay creditors around 142,000 BTC worth nearly $9 billion from July to October.
News of Mount Gox’s impending BTC payout sent shockwaves through the crypto markets last week, leading to more than $313 million in liquidations.
But Thorn says the fear surrounding Mt. Gox saga is likely exaggerated, as his research shows that less than half of the coins at issue are likely to be available to be sold on the open market. He also says that recipients will likely keep their BTC pile instead of selling right away.
According to Thorn, individuals who will receive their BTC in the coming months have agreed to accept a haircut of 10% to 11% in order to take advantage of Mount Gox’s early withdrawal scheme. Thorn estimates that 75% of creditors have accepted the deal, reducing the number of BTC available for delivery to 94,600 coins.
The Galaxy director further notes that many people have previously sold their bankruptcy claims to funds at a discount. According to Thorn, funds aggressively bought claims from Mount Gox users who did not want to wait years before seeing a cent of their money.
“A lot of people have sold their coins and we think about 20,000 of the Bitcoin is in these funds. So let’s put that aside for a moment. So now we only have 74,000 coins.”
Thorn notes that it is unlikely that the funds that purchased the bankruptcy claims will be a major source of sales, as he believes that the entities that provided the liquidity to purchase the claims will hold the coins once they are released.
“Talking to some of them, my understanding is that they are all planning to make in-kind deliveries to their LPs (liquidity providers)… Again, talking to some of the big LPs in these funds, as well as some of the funds that these LP bases are almost complete. made up of wealthy Bitcoiners who actually want to get Bitcoin at a discount… If we pay some attention to this, we’re pretty sure these are actually people with diamonds who wanted to stack at a discount.”
According to Thorn, the last cohort to receive BTC from Mount Gox is the crypto exchange Bitcoinica. Thorn says the exchange will raise 10,000 BTC, but notes that Bitcoinica cannot immediately sell its Bitcoin treasure as it has to go through its bankruptcy process in New Zealand.
All in all, Thorn estimates that 64,000 BTC will be paid out into creditors’ trading accounts. Galaxy’s director believes that these entities are early Bitcoiners, more likely to hold onto their stacks rather than sell upon receipt.
“Overall, I don’t think there will be much sales. That’s what this all comes down to. Or at least I should say that I think it will sell much less than a naive look at the headline would suggest.”
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