Mt.Gox May Release 140,000 BTC in August and BTC is Facing the Biggest Challenge in 2019

18 Mar, 2019 18:41
source: 奇点财经 singularity financial

Key points of the article:

  1. 200,000 BTC remained when Mt.Gox went bankrupt. The bankruptcy custodian, Nobuaki Kobayashi sold 60,499 BTC and 59,339 BCH from December 2017 to June 2018, cashing out USD 616 million. This transaction has a indirect relationship with the arrival of the bear market.
  2. If the compensation plan is successfully passed, the remaining 141,676 BTC and 142,846 BCH will be returned to the members as early as in August 2019. Victims will be granted with bitcoins for reparation if it is requested.
  3. A total of 25,000 victims will receive compensation. These members held a total of 750,000 BTC in 2014, which valued at $338 million at that time. Today, the total value of BTC, BCH and Japanese yen held by Mt.Gox is 1.194 billion US dollars, and the yield is about 3.53 times. It is expected that some users will sell BTC to leave the market. Thus, the market may be under tremendous pressure.

Background Information:

In April 2014, the world largest bitcoin intermediary, Mt. Gox announced that approximately 750,000 bitcoins belonging to customers and the company were likely stolen, which resulted in bankruptcy shortly afterwards.

Mt.Gox has 200,000 remaining BTC when they went bankrupt. The bankruptcy custodian,Nobuaki Kobayashi sold out 60,499 BTC and 59,339 BCH from December 2017 to June 2018, cashing out 616 million US dollars. This transaction indirectly lead the arrival of the bear market.

If the compensation arrangement by the court goes through, the remaining 141,676 BTC and 142,846 BCH will be returned to the victims as early as in August 2019. Victims will be granted with bitcoins for reparartion if it is requested.

There are a total of 25,000 victims to be compensated, together they held a total of 750,000 BTC in 2014, which was around US$338 million at market value. Today, the valuation of those bitcoins has gone up to 1.194 billion US dollars, and the yield rate is about 3.53 times. It is expected that some users will sell BTC to leave the market. Thus, the market may be under tremendous pressure.

After experiencing more than five years of forced “lockup”, it is inevitable that some members will let go their coins. The 70,000 BTC sold in 2018 has already brought huge impact to the market, the release of 140,000 BTC in 2019 is expected to affect the market even further. The sfl.global reminds investors to pay attention to the risks.

The Mt.Gox exchange, which is nicknamed as Mentougou by Chinese users, was founded by the eMule, Ripple and Stellar founder, Jed McCaleb. However, Jed did not operate Mt.Gox well and it was then acquired by Frenchman Mark Karpeles in 2011. Karpeles developed Mt.Gox as the world’s largest Bitcoin exchange. In April 2013, when Bitcoin price soared to $100, Mt.Gox accounted for 70% of the global Bitcoin trading share.

However, the prosperous times did not last long. Mt.Gox was attacked by hackers in 2014 (many people suspected that it was being stolen by Mt.Gox itself), causing the exchange to lose 100,000 BTC and 750,000 BTC from customers. Fortunately, Mt.Gox recovered 200,000 BTC in the wallet after being stolen. However, the subsequent assets could not be offset by debt, so Mt.Gox began the bankruptcy liquidation process. The Tokyo District Court sued Mark Karpeles and entrusted Nobuaki Kobayashi as the clearing custodian of the Mt.Gox Exchange, responsible for the settlement of creditors.

Selling 70,000 BTC in two stages

With the increase in BTC price in 2017, the value of BTC held by Mt.Gox was sufficient to compensate creditors. However, considering the volatility of BTC prices, Nobuaki Kobayashi began to sell BTC and BCH from forks in order to ensure giving sufficient compensation.

According to recent research conducted by Singularity Financial, the process of selling BTC by Mt.Gox was divided into two stages. The results were published in the “Statement by Creditor’s Assembly on 7 March” on March 9, 2018, and “Related Measures to Protect the Interests of Creditors” announced on September 25, 2018, the information is as follows:

1.The first stage: December 2017 – March 7, 2018

Mt.Gox sold a total of 35,841 BTC and 34,008 BCHs, cashing in a total of 42.9 billion yen ($383 million) during the period.

2.The second stage: March 7, 2018 to June 22, 2018

Mt.Gox sold a total of 24,658 BTC and 25,331 BCH, cashing in a total of 25.976 billion yen ($231 million) during the period.

“Statement by Creditor’s Assembly on 7 March” mentions that the bankruptcy foundation manages 166,334 BTC and manages 168,177 BCH at this stage. Subtracting the portion sold from March 7 to June 22, it can be inferred that Mt. Gox has 141,676 BTC and 142,846 BCH currently.

The cold wallet tracking data for Mt. Gox also verifies almost the same numbers. The amount of remaining BTC and BCH in the cold wallet are both 137,891 respectively, and the remaining 5,000 may be transferred to other areas for safekeeping.

Datasource:cryptoground

It is worth noting that the BTC price reached the highest record price in December 2017. Mt. Gox then began to sell Bitcoin. The transaction had a direct correlation with the price of Bitcoin entering the bear market.

Datasource:CoinMarketCap

The remaining 140,000 BTC will be issued in August

Nobuaki Kobayashi was resisted by some creditors after the previous BTC sell-off. The sell-off caused the price of the cryptocurrency market to fall sharply, resulting in the loss of creditor interests. Nobuaki Kobayashi did not continue to sell BTC after June 2018. He also said that for member who wish to receive compensation in BTC, Mt. Gox will compensate with BTC in principle.

Singularity Financial pointed out in previous reports that the remaining 140,000 BTC will be issued as early as in May 2019. This specific time comes from the compensation plan (the Japanese official name is “Civil Renewal Case”)  issued by Nobuaki Kobayashi in August 2018.

Source: mtgox-creditors.com

Nobuaki Kobayashi also stated that the creditor has been waiting for four years. Mt. Gox should issue the compensation immediately when the plan is finalised.

The same document also indicates the future compensation process, as shown in the following figure:

The first step of compensation process has been initiated. The creditors are submitting materials. This process was scheduled to be completed on January 24, 2019 originally. However, the Tokyo court issued a notice on January 24, 2019, stating that many creditors submitted materials by post, which made it difficult to check. Therefore, the following processes will be postponed for about two months.

The time for the specific compensation plan submitted by the lawyer is changed from 14th February to 26th April.

Therefore, the compensation period will also be delayed accordingly. The original compensation period was from May to June. After a two-month extension, Singularity Financial expects the compensation will be issued in August 2019.

The estimation of member’s position cost

Nobuaki Kobayashi mentioned in the statement that there were more than 25,000 Mt.Gox creditors. According to the stolen information of Bitcoin released by Mt.Gox in 2014, these members held 750,000 BTC.

When Mt.Gox was stolen in March 2014, the price of BTC was around $450, and the total value of 750,000 BTC was about $338 million.

According to the above estimation, Nobuaki Kobayashi has cashed out $615 million after selling BTC and BCH, while holding 141,676 BTC and 142,846 BCH on hands. Based on the current CoinMarketCap price, these cryptocurrencies are worth about 5.50+0.29=$579 million. (BCH prices are calculated based on the total prices of current BCHABC + BCHSV ).

Therefore, the total value of the yen, BTC and BCH held by Mt.Gox is approximately 1.194 billion dollars. In addition, the compensation plan clearly shows that no compensation will be paid to the shareholders and all assets will be distributed to the creditors. Therefore, for the members who stored the cryptocurrency in Mt.Gox, the gain is about 3.53 times in 4 years. Thus, it can be roughly assumed that the cost of BTC positions for these members is around $1,200.

After more than five years of forced “lockup”, it is inevitable that some members may sell BTC among the 25,000 members. The selling of 70,000 BTC brought huge impact to the market in 2018. After issuing 140,000 BTC, the market will face the biggest challenge in 2019. Singularity Financial reminds investors to pay attention to the risks.

Reference:

1.Mt.Gox ‘s announcement on BTC holdings:https://www.mtgox.com/img/pdf/20140320-btc-announce.pdf

2.Mt.Gox’s statement on related initiatives to protect the interests of creditors:https://www.mtgox.com/img/pdf/20180925_announcement_ja.pdf

3.Mt.Gox’s announcement on the extension:https://www.mtgox.com/img/pdf/20190124_announcement_ja.pdf

4.Mt.Gox’s creditors announcement website.https://mtgox-creditors.com