After nearly a decade of liquidation, Mt. Got creditors are set to recover part of their funds. Although, many are concerned about the massive amount of Bitcoin that will be released into the market.
No Fears Over Bitcoin Instability
According to UBS, the recent fears over a possible oversupply of Bitcoin due to creditors getting part of their funds are overblown. In its report, UBS explained that the “rehabilitation plan” will give creditors options on how to be repaid and the time of the repayment.
The most crucial aspect to consider, per the report, is whether creditors can take an early lump amount or wait until after the conclusion of the proceedings when further asset recoveries have been made. In addition, the UBS report stressed that creditors could select whether to be paid in crypto or fiat.
Furthermore, the option for the early lump-sum repayment with fiats suggests that Mt. Gox will have to sell Bitcoin to raise the required amount of cash, said strategists Ivan Kachkovski and James Malcolm. This is also attributed to the long-held fear that the exchange’s redemption will significantly hurt the price of BTC.
While Mt. Gox reportedly lost 850,000 Bitcoin in 2014, the exchange has recovered 142,000 BTC, 143 in BCH (Bitcoin Cash), and 69 billion Japanese Yen, representing 20% of the total asset lost. However, the likelihood of the repayment affecting the price of BTC still exists.
Meanwhile, that amount of BTC represents nearly 90% of its average asset supply within the previous day and 28% in the past seven days. On the whole, this is significant as active token supply increases are frequently associated with a drop in the price of BTC, the note added.
Thus, fewer BTC assets will enter the market because many early adopters are firm believers in cryptocurrency. In the meantime, the market could still see the new supply of the token, but in a less concentrated form.
Large Creditors Choose Crypto Payout
According to multiple reports, two of the largest creditors with Mt. Gox, with a combined share of 20%, have opted for cryptocurrency payout, added UBS. The now-defunct New Zealand-based crypto trading firm, Bitcoinica and MtGox Investment Funds (MGIF) are those two creditors.
The two firms opted to receive payments in 90% crypto assets, calculated based on the 21% of what they’ve locked up on the platform since the 2014 hacking incident. Moreover, their decision to opt for crypto payments has soothed the nerves of Bitcoin enthusiasts who fear that Mt. Gox bankruptcy recoveries would trigger a significant fall in the price of BTC.
Sources familiar with the event revealed that had the two platforms opted for fiat repayments, the insolvency trustee would have been forced to sell off a large part of the exchange’s recovered Bitcoin holdings.
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