The bitcoin exchange rate plummeted by 8% on rumors that the wallets containing the coins of the defunct Mt. Gox, make transactions. It quickly became clear that the information was caused by a technical error, but the incident clearly demonstrated the market reaction to the possible sale of thousands of coins from the bankrupt exchange. RBC Crypto.
Mt.Gox was one of the world’s largest cryptocurrency exchanges that operated from 2010 until it filed for bankruptcy in 2014 after a series of hacks. At its peak, Mt.Gox accounted for about 70% of the total Bitcoin trading volume. As a result of the 2014 hack from Mt. Gox stole 850,000 bitcoins, worth $17.8 billion at the current exchange rate.
The exchange’s bankruptcy led to a 7.5-year legal battle before a solution was developed in 2021 in the form of a rehabilitation plan for affected users. Since not all the stolen coins were returned, they will be compensated only for a part of the initial amount – about 200 thousand BTC. The payment deadline is September 30th. $1.7 billion, 141,000 BTC and another 142,000 Bitcoin Cash (BCH) coins will be distributed as part of a civil rehabilitation plan designed for 10,000 clients worldwide.
On the afternoon of April 26, the bitcoin rate exceeded $30,000. However, at 22:00 Moscow time, the value of the asset began to decline sharply and dropped to $27.6 thousand by 23:00. By the morning of April 27, the price of the asset recovered to $29,000. bitcoin rate with rumors about the sale of bitcoins Mt.Gox.
However, Arkham Intelligence, the analytics platform that originally sent out the warnings, later said the data was misinterpreted.
Thousands of bitcoins
“Bitcoins Mt. Gox” has been a hot topic for retail traders for several years now, explains crypto expert and author of the GFiS Channel telegram channel Taisiya Romanova, who specializes in blockchain data research and algorithmic trading in cryptocurrencies. According to her observations, often the appearance of any information related to them causes a market reaction.
This is largely due to the fact that robots for trading that track sentiment (the so-called market sentiment) and due to delusions react to headlines of this kind, the expert explains. As the April 26 incident showed, a mere mention of the name of the exchange is enough for the market to react, even if the assets are not directly related to the wallets that actually hold the bitcoins of the victims of the hack.
The payment system is “rather confusing” and does not provide for a one-time payment to all victims. In addition, it may be beneficial for the fund manager to delay the process, making sure that the payment of compensation does not happen quickly and at once.
“Some of the affected users chose a refund in cryptocurrency, the other part chose a bank transfer at a rate several times lower than the current market. Some chose to receive a smaller amount early, while others chose a larger amount within a few years, and so on. Thus, the option is impossible in which the entire mentioned amount of 140 thousand bitcoins will somehow be simultaneously sold “through the glass” on the exchange, Romanova explains.
Successful strategy
Analysts at Matrixport came to similar conclusions, publishing a brief report on market events on the night of April 27th. According to their findings, payouts to Mt.Gox clients will result in a limited impact on the price of bitcoin.
Analysts emphasized that market participants should be aware of this turn of events, so one should not expect a serious impact on cryptocurrency prices. Taking advantage of the fall in the rate to buy coins in anticipation of a return to their original levels following the refutation of rumors, according to the authors of the report, looks like a successful trading strategy. When Arkham representatives reported the error, the rate of bitcoin and other cryptocurrencies really recovered.
In February 2014, when Mt.Gox went bankrupt, Bitcoin was trading at around $550. Given the payments at the current rate, clients can theoretically return their coins with a high profit. But given that the affected users will receive payments in installments, how they will dispose of them is a big question, Taisiya Romanova. It is not at all a fact that they will decide to sell them immediately, and it is on exchanges, and not to use OTC platforms without affecting the open market.
Similarly, concerns about the sale of cryptocurrencies confiscated by the US government should be taken, Romanova believes. Such coins are sold at auctions, and, as a rule, subsequently do not fall directly into the order book. For amounts of this order, there is an OTC market, the expert explains.
The first official buyer of confiscated bitcoins is investor Tim Draper. In 2015, he managed to win an auction for the distribution of bitcoins of the first ever illegal online marketplace Silk Road. Draper never said at what rate he got the coins. He is an open supporter of cryptocurrencies and predicts the rise in the price of the first cryptocurrency to $250,000 in 2024.
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