How Bankrupt Crypto Repayments Will Affect Your Bitcoin Investment
Written by
Vance Cariaga
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Daria Uhlig
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Cryptocurrency markets got rattled earlier this week after the price of bitcoin fell to a four-month low, partly because of problems tied to a crypto company. The events led to new worries about bitcoin investments that have been heading in the wrong direction of late.
As Fortune reported on Monday, one reason for the bitcoin selloff has to do with repayments made by Mt. Gox, a Tokyo-based crypto exchange that went bankrupt a decade ago after being hacked. Mt. Gox recently started returning about $8-$9 billion in bitcoin to creditors.
As of Monday, it had been verified that 47,228 bitcoins from a Mt. Gox-associated wallet have moved to a new address likely designated for repayments, Matteo Greco, a research analyst at investment firm Fineqia International, told Forbes.
Although investors might be required to wait up to three months to access the funds, news of the repayments still “spooked the market and triggered current holders to begin selling,” Fortune reported.
The price of bitcoin fell nearly 12% intraday on Monday before closing at around $55,500. The price rebounded to near $58,000 on Tuesday, but it’s still well off its 2024 peak of about $73,225, set in early March.
Before the recent selloff, bitcoin had been enjoying a strong rebound in 2024 after dipping below $26,000 as recently as September 2023. As Forbes India noted, bitcoin has been in a “weeks-long decline” that has seen it lose about one-fifth of its value.
Part of the problem has to do with broader trends, such as waning interest in crypto ETFs and economic uncertainty. But much of it has to do with Mt. Gox.
“As the [Mt. Gox] exchange prepares to compensate creditors with recovered bitcoins, fears of a major sell-off are swirling,” Shashank Bhardwaj, founder of yMedia, wrote in a column for Forbes India. “Market observers worry that a sudden influx of bitcoins could overwhelm demand, driving prices further down.”
Compounding the problem is the fact that the German government recently liquidated seized bitcoins and has been “offloading bitcoins on major exchanges like Coinbase and Kraken,” Bhardwaj noted.
“This liquidation of seized crypto assets from criminal groups adds to the overall selling pressure,” he wrote. “With an estimated $2.2 billion worth of bitcoins still reportedly held by Germany, further selloffs could potentially exacerbate the current downturn.”
Meanwhile, there has been even more selling pressure following a “halving” of bitcoin in April, which slashed the rewards miners receive for minting new coins by 50%, Fortune reported. This pressure has lately shown signs of easing, but it still has lowered demand and worsened the short-term price drop.
“[Traders] don’t want to get in front of billions of dollars of supply that could hit the market in the weeks ahead,” Andrew Baehr, head of product at CoinDesk Indices, told Fortune.
Despite the recent volatility, some cryptocurrency experts remain bullish on bitcoin’s long-term potential. Near-term, industry watchers are expected to keep a close on how the market reacts to the Mt. Gox situation.
“The coming weeks will be crucial, with investor sentiment likely hinging on developments surrounding Mt. Gox repayments and further German government actions,” Bhardwaj wrote.
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