The upcoming redemption process for Mt. Gox, the infamous defunct crypto exchange, has cast a shadow of uncertainty over the Bitcoin market. With over $10 billion worth of Bitcoin slated to be distributed to creditors who lost funds in a 2014 hack, concerns about a massive sell-off driving down prices have been swirling. However, some traders believe these fears may be misplaced.
The crux of the argument lies in the behavior of creditors and the nature of the holdings. Many creditors have had over a decade to sell their claims if they desired immediate cash. These claims likely ended up in the hands of long-term investors who believe in Bitcoin’s future, reducing the likelihood of a fire sale.
Furthermore, the cost basis for these Bitcoins – the price they were initially purchased – is likely shallow, potentially below $700 each. Selling at current market prices (around $65,000) would represent a massive profit, incentivizing holding rather than immediate selling.
Analysts like Sam Callahan of Swan Bitcoin believe the impact on price is likely overblown. They point out that creditors who wanted out likely already sold their claims, and the remaining holders may be more likely to see this as a long-term investment opportunity due to the low acquisition cost.
Only time will tell how the Mt. Gox redemption process unfolds.
However, the concerns of a market-crushing sell-off may be tempered by the possibility that many creditors are already long-term holders with little incentive to sell.
