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Mt. Gox Payout Deadline Postponed Again, Next Bitcoin Price Dump In 2023?

One concern for Bitcoin investors has taken a back seat in recent weeks and months amid macroeconomic headwinds and crypto-intrinsic contagion effects: the release of recovered BTC from Mt Gox. Originally, users of what was once the largest Bitcoin exchange were supposed to file their claims by January 10, 2023. Shortly after that, payouts were to begin, according to an October statement.

However, the deadline has already been pushed back countless times. And as a document released today by rehabilitation trustee Nobuaki Kobayashi shows, Mt. Gox claimants will have to continue to be patient. The deadline for repayment method selection and registration is postponed from January 10, 2023, to March 10, 2023 (Japan time) to “take into account various circumstances, such as the progress of rehabilitation creditors in terms of selection and registration.”

The document goes on to say that after that date, Kobayashi will begin confirming registrations “in order to make the repayment as soon as possible after March 10, 2023.” Following this change, Kobayashi has also changed the base repayment deadline, early lump-sum repayment deadline, and intermediate repayment deadline from July 31, 2023, to September 30, 2023.

Is The Bitcoin Price Facing A Price Dump?

According to the rehabilitation plan, victims of the Mt. Gox hack will be reimbursed a total of 141,686 Bitcoin (BTC), the equivalent of about $2.37 billion. Because of that, concerns about a massive price drop have been circulating in the crypto space for some time. The question is whether the Mt. Gox Bitcoin situation will push the price into heavy losses once again.

However, looking at the facts, this does not seem very likely. There is a lot of false information circulating on Twitter. But the fact is that Bitcoin will not be dumped on the market all at once.

Not all of Mt. Gox’s customers are likely to sell their Bitcoins, although customers may enjoy enormously high returns by already holding them involuntarily. Moreover, Kobayashi will not release all Bitcoins at once, rather the whole process will take several months – from March to the end of September according to the current schedule.

And even if a large portion of BTC is dumped, it is very likely that the market can easily handle the additional liquidity. The impact is likely to be small, as the daily trading volume would still be enough to cushion the selling, even at the historic low of around $15 billion.

Bitcoin Price Today

At press time, BTC was trading at $16,739 and struggling with support at $16,740. Ideally, the Bitcoin price needs to hold above $16,600 to avoid a slide below $16,000 and maintain upside momentum. If this is successful, a move to the upside towards $17,000 could be possible, where the next key resistance is waiting.

Bitcoin price

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Will Mt. Gox Release The 140K BTC On January 2023? Repayment Methods Revealed

The Mt. Gox hack was a watershed moment for bitcoin. And the future repayment to the affected people will surely be another one. Since we’re in a bear market, most people worry about what effect will those 140K BTC will have on the price. Will the Mt. Gox class prove to be holders or will they sell it all as soon as they get it? That’s a question for another day, since the Mt. Gox class has until January 10th, 2023, to complete registration and select their preferred payment method.

The last time we reported on the issue, attorney-at-law Nobuaki Kobayashi was appointed as the Rehabilitation Trustee and the repayment procedures were expected to begin on September 15th. NewsBTC also informed that “the Mt. Gox bitcoin repayments will happen over a period of time, putting only a portion into circulation at a time. This will see that there is a much lesser impact from the BTC coming into the market and wouldn’t tank the price of BTC.”

This time, we’ll learn about the repayment methods and the full KYC procedures that the Mt. Gox class is going through to get that sweet vintage BTC.

Mt. Gox Hack Repayment Options

It’s hard to believe, but it seems that after all these years the Mt. Gox story will come to an end. Ok, there’s been postponement after postponement and a million new requirements, but there’s also been progress. This time, Mt. Gox announced, “Regarding repayment under the Rehabilitation Plan (“Repayment”), the Rehabilitation Trustee has launched a function for creditors to select a repayment method and to register payee information.”

The creditors “who wish to receive Repayment” will have to go here and complete the “Selection and Registration” form before January 10th. This is more than mandatory. “If you do not complete the necessary Selection and Registration, you will not be able to receive any of the Repayments below, and you will need to bring the required documents to the MTGOX Co., Ltd. head office.” They will also have to “receive Repayment in Japanese yen (cash).”

On the other hand, those who complete the forms on time will be able to choose between these repayment methods:

  • Early Lump-Sum Repayment
  • Repayment for a Portion of Cryptocurrency Rehabilitation Claims in Cryptocurrency
  • Repayment by Bank Remittance
  • Repayment by Remittance through a Fund Transfer Service Provider  

It’s also worth noting that to receive payment in the selected method, these three names have to coincide:

  • “Creditor Name (the name notified to the Rehabilitation Trustee by the rehabilitation creditor)”
  • “Name of Payee information (Name of the receipt bank account for a bank remittance, the account of a fund transfer service provider, and the cryptocurrency exchange/custodian account, etc.)”
  • “Name set forth in the identification documents submitted by the rehabilitation creditor to verify identity using the service provided by Onfido PTE Ltd.”

BTC price chart for 10/08/2022 on Gemini | Source: BTC/USD on TradingView.com
How Will Repayment Affect The Bitcoin Market?

The 140K BTC that Mt. Gox will release into the wild will for sure affect the bitcoin price, but maybe not as much as people fear. The different payment methods guarantee that everything will happen gradually. And the Mt. Gox class consists of early bitcoiners. They might’ve learned something along the way and not be so eager to sell their BTC. Those coins appreciated considerably since the Mt. Gox hack, but the price might go even higher in the future.

Of course, a portion of the creditors will immediately take some profit. However, they forcibly waited since 2014 for those BTCs. Is there a rush to sell at these prices? Patience is a virtue.

Featured Image: Mt. Gox logo from Wikimedia | Charts by TradingView

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Summary Of The Contagion Event That Brought On The Bear Market

Are we in a bear market? Opinions vary, but it certainly feels like one. Markets across the board and across the world are in the red, and the bitcoin and crypto ones are no exception. If you’ve been paying attention, you know how all of this happened, but a refresher course wouldn’t hurt. Using ARK Invest’s latest Bitcoin Monthly report as a guide, let’s go through the tragic sequence of events and evaluate the bitcoin market as it stands.

According to ARK, the road to the bear market went like this: 

“Beginning with the Terra collapse in early May, contagion spread to major crypto lenders including Blockfi, Celsius, Babel, Voyager, CoinFlex, contributing to the insolvency of the once highly-respected hedge fund, Three Arrows Capital (3AC). Since Terra’s collapse, total crypto market capitalization has dropped ~$640 billion.”

Nevertheless, there seems to be a light at the end of the tunnel. “Promisingly, however, recent fallout (Babel, Voyager, CoinFlex, Finblox) appears lower in magnitude compared to Terra, Celsius, and 3AC.” That doesn’t mean the end of the bear market is near, nor that capitulation is already over. Especially if the Mt. Gox victims receive the rumored 150K BTC.

First, let’s follow ARK as they analyze two of the main players in this drama. Then, let’s check the stats of the bitcoin market to see if we can find signs and clues that point out to the end of the capitulation stage. SPOILER ALERT: The jury is still out on that one. Some signs point to an early end, others to further downside. Aren’t bear markets fun?

Celsius And The Bear Market

When Terra fell, the earth trembled. The Luna Foundation Guard sold nearly all of their 80K BTC reserve trying to defend the UST peg to the dollar. This event could’ve been the catalyst for the bear market. The worst was yet to come, though. Several once-respected institutions were heavily exposed to Terra through its Anchor protocol, and the UST collapse sent them all into a still ongoing death spiral. 

According to ARK, “Celsius froze withdrawals on June 12th in response to significant outflows. Its DeFi debt outstanding is $631 million but the magnitude of its nonDeFi exposure is unclear.” There was still hope for its clients, as the company paid several loans. However, Celsius filed for Chapter 11 bankruptcy, leaving them all high and dry.

The Chief Commercial Officer at Choise.com, Andrey Diyakonov, analyzed the situation for NewsBTC:

“To put things into perspective, we need to turn it upside down, and ask, how much of the recent price action on the markets was influenced by or outright created by Celsius’ actions? What goes around always comes around. It’s so much more ironic given those credible reports that Celsius withdrawals were among those that sent UST and Terra position down the rabbit hole to find out where the bottom is.”

Our team covered that particular claim and the company’s response.

Three Arrows Capital And The Death Spiral

Then, there was “Three Arrows Capital (3AC), a highly regarded crypto hedge fund reportedly managing $18 billion at its peak, appears to be insolvent after taking on too much leverage.” That’s according to ARK, who also says, “Seemingly, 3AC took on excess leverage to try and recover the losses. Its creditors included major players in the industry like Genesis, BlockFi, Voyager, and FTX.”

All of those companies except FTX seem to be counting down to extinction. 

BTC price chart for 07/15/2022 on Velocity | Source: BTC/USD on TradingView.com
Is The Bear Market Just Beginning Or About To End?

Is the bottom in? Opinions vary. In a section titled “Market Contagion Sets Bitcoin Into Capitulation,” ARK analyzes all of the indicators and can’t reach a final conclusion. The numbers are extremely interesting, though.

  • “Down 70% from its all-time high, bitcoin is trading at or below some of its most important levels: its 200-week moving average, the general cost basis of the market (realized price), the cost bases of long-term (LTH) and short-term holders (STH), and its 2017 peak.”

This “suggests extremely oversold conditions,” which is a great sign. However…

  • “Historically, global bottoms occur when the MVRV of short-term holders exceeds the MVRV of long-term holders. That condition has not been met, suggesting the potential for more downside.”

The “condition has not been met,” but it’s close. Very close.

  • “This month, miners generated revenues only 45% of that for the last twelve months, breaching a threshold that usually correlates with market bottoms.”

Miners who didn’t practice proper risk management have been selling at the present low levels. Miners who know what they’re doing will keep holding until we come out of the bear market. The question is, how many companies are in the first group and haven’t sold just yet? 

  • “Net realized losses in bitcoin recently reached a 2-year low, breaching 0.5% for only the fourth time since 2013.”

Historically, this suggests capitulation is over. Or is it?

  • “Bitcoin’s net unrealized loss has hit a 3-year low, highlighting that its current market value is nearly 17% lower than that of its aggregate cost basis. Historically, global bottoms have formed when losses hit 25%+.”

If we’re going to reach 25%, that means there’s still a long way to go.

Is the bear market just beginning or about to end? The data is unclear. But capitulation seems to be nearing its end, which would be the first step in the right direction.

Featured Image by Marc-Olivier Jodoin on Unsplash | Charts by TradingView

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ARK: Now Decoupled From Terra, “Bitcoin’s Selling Pressure Should Subside”

The Terra / Luna / UST collapse keeps on generating headlines. This time, we’ll use the data in ARK’s “The Bitcoin Monthly” report to establish its impact on the bitcoin ecosystem. Remember that the non-profit organization LFG, AKA as the Luna Foundation Guard, was accumulating BTC to defend UST’s peg to the dollar. In a then-delated May interview, Terra’s Do Kwon said that they were trying to get to $1B in BTC so that “besides Satoshi, we will be the largest single holder of Bitcoin in the world.” He also proclaimed, “within the crypto industry, the failure of UST is equivalent to the failure of crypto itself.”

Related Reading | Terra Beats Tesla As Second-Largest Corporate Bitcoin Holder After $1.5B Purchase

At one point, it appeared that BTC and UST destinies were inextricably linked, but the bitcoin network absorbed the collapse nearly unscathed. Let’s look at ARK’s numbers and try to figure out how it did it. 

Terra, The Largest L-1 Blockchain Failure Ever

At this point, everybody knows what happened with Terra. Nobody knows how it happened, though. Was it a coordinated attack or did the natural market’s forces trigger the death spiral event? We wouldn’t know, but the fact of the matter is that the UST de-pegged from the dollar causing a bank run in the Anchor protocol, and the eventual demise of the algorithmic stablecoin and its twin, LUNA.

How big was the collapse? According to ARK’s report:

“In addition to causing the crash in UST and Luna, we believe Terra is the largest layer-1 blockchain failure in crypto history, wiping out a combined $60 billion of market capitalization between UST and Luna.”

Huge in size by any metric, but, how does it compare to previous crypto collapses? The only comparable collapse was “the Mt. Gox hack that stole 5.7% of total crypto market cap in 2014, Terra’s collapse destroyed roughly 2.7% of crypto’s total market capitalization.” The Mt. Gox hack almost destroyed the bitcoin network at a time when it was more vulnerable. The Terra collapse felt like a breeze in comparison, but, as the numbers show, it wasn’t. 

BTC price chart for 06/07/2022 on Eightcap | Source: BTC/USD on TradingView.com
How Did The Terra Collapse Affect BTC?

Besides the LFG foundation reportedly selling its 80K BTC, the collapse created extreme selling pressure on bitcoin. According to the report, “exchanges recorded net inflows of 52,000 bitcoin, the largest daily inflow in BTC terms since November 2017 and the largest inflow ever in USD terms.” These are notable numbers. 

Bitcoin Net Flows To and From Exchanges | Source: ARK’s “The Bitcoin Monthly”

According to the bitcoin blockchain, the account associated with “LFG currently holds 313 BTC, down from 80,934 BTC held prior to Terra’s unraveling”. Did they sell the rest, though? Nobody knows for sure. Back to the report: 

“To backstop UST’s peg, The Luna Foundation Guard (LFG) reportedly sold most of its ~80,000-bitcoin reserves, contributing to this record inflow.”

Surprising even hardcore bitcoiners, the network resisted this massive sell-off without breaking a sweat. Sure, bitcoin’s price suffered, but the blow wasn’t even close to being fatal. And ARK’s prediction reflects that fact, “now decoupled from the Terra blockchain, bitcoin’s selling pressure should subside, yet contagion in the crypto markets is still inconclusive.” Why? Because “bitcoin’s more secure and conservative blockchain should gain market share.”

Are Algorithmic Stablecoins Even Possible?

To answer this we’ll quote NYDIG’s report “On Impossible Things Before Breakfast,” which comes with the subtitle, “a post-mortem on Terra, a pre-mortem on DeFi, and a glimpse of the madness to come.” As the titles gave away, NYDIG believes that not algorithmic stablecoins nor DeFi as it currently stands are possible. Why? Well…

“No matter how well intentioned, all algorithmic stablecoins will fail and the vast majority – possibly all – of DeFi’s current versions will fail, where “fail” here means not gaining sufficient critical mass to matter, being hacked, blowing up, or being altered by regulation to the point of non-viability. In the end, the Terra project could control the supply of its money, but it couldn’t make its people value it. A printing press was the only (non)answer. Sound familiar? Lacking a lender of last resort, DeFi (re)creates the problems solved by central banks. Bitcoin solves the problems created by central banks.”

Related Reading | TerraLabs Sold Over 80,000 BTC To Rescue Its Stablecoin

As it usually happens, we could summarize this whole article with the old adage: “Bitcoin fixes this.”

Featured Image by Louis Maniquet on Unsplash | Charts by TradingView