Ten Questions and Answers to Clarify Mt. Gox Incident
On the morning of June 24 UTC, news about “Mt. Gox starting BTC and BCH repayments” quickly impacted the market. Due to concerns about potential selling pressure, the already weak cryptocurrency market was further hit, with BTC briefly falling below $59,000 and ETH nearing $3,200.
However, there remains significant confusion and even rumors about the Mt. Gox repayment event within the market. As a result, many readers do not fully understand the situation and are unable to assess its potential impact on the market. To clarify these uncertainties, CoinDarwin will use market information and interviews with creditors (such as Mindao, founder of dForce) to provide a Q&A format explanation.
Q1: Is this the first time Mt. Gox is repaying its debt?
A1: No, as early as December 21, 2023, several Japanese users stated on social media that they had received yen compensation through PayPal. This included notable figures like Yuzo Kano, founder of the leading Japanese exchange bitFlyer.
According to a notification from the bankruptcy trustee Nobuaki Kobayashi, this part of the compensation came from 7 billion yen redeemed from the bankruptcy trust on November 17, 2023.
Q2: Why is this repayment special?
A2: This is the first time Mt. Gox is repaying in the form of BTC and BCH, meaning that the 141,686 BTC held by Mt. Gox (along with an almost equal amount of BCH) will start flowing into the market.
These BTC represent 0.72% of the total circulating supply of Bitcoin, valued at approximately $8.54 billion.
Q3: When will the repayment take place, and when will the selling pressure hit?
A3: According to Nobuaki Kobayashi‘s latest email notification, repayments will begin in July 2024.
Q4: What are the specifics of the repayment?
A4: Creditor Mindao explained that Mt. Gox will calculate each creditor’s share (only for those who chose to receive repayment in “physical” form, as some opted for fiat repayment) based on the BTC price at the time of bankruptcy. The BTC held will then be distributed according to this share.
Considering Mt. Gox lost approximately 650,000 BTC, and now holds 140,000 BTC, the recovery rate in BTC terms is about 21.5%. Simply put, if you held 100 BTC back then, you would now receive approximately 21.5 BTC.
This means a significant drop in BTC terms but substantial gains in fiat terms due to BTC’s massive price increase over the years (essentially a forced hold).
Initially, Mt. Gox claimed to have lost 850,000 BTC (750,000 from customers and 100,000 from the platform), but later stated they found 202,185 BTC previously thought to be stolen, revising the loss to 650,000 BTC.
Q5: Why must the debt ratio be calculated based on the BTC price at that time?
A5: Essentially because Mt. Gox is insolvent; the amount of BTC they currently hold cannot cover their BTC liabilities 1:1. Therefore, Mt. Gox had to find a price to calculate the debt ratio for current holdings distribution. The specific price was determined by the Japanese court during the bankruptcy case review.
Mindao also mentioned that Mt. Gox users held not only BTC but also fiat assets. Hence, Mt. Gox had to choose a base currency for calculations—ultimately, they used the yen price as the basis.
Q6: What was the BTC price back then, and what is the reference price?
A6: The Tokyo District Court’s liquidation ruling on the Mt. Gox bankruptcy case stated that the BTC debt value would be calculated based on the price in April 2014, when Mt. Gox declared bankruptcy—50,058.12 yen per BTC (approximately $314 at current exchange rates).
However, this price is only for calculating creditors’ debt ratios, not the amount each BTC will be repaid. In reality, the repayment per BTC will be much higher.
Mindao added that when Mt. Gox was hacked in June 2011, the BTC price on Mt. Gox fell to as low as $150, while the market price was about $300. Users who bought BTC on Mt. Gox at that time would receive the highest “compensation yield.”
Q7: How will creditors receive their repayments?
A7: Creditors registered their receiving addresses earlier this year and will receive payments through exchanges such as Kraken, Bitstamp, and Bitgo.
Q8: What are Mt. Gox’s holding addresses and how can one monitor the flow?
A8: After the last collection on May 28, Mt. Gox’s BTC are mainly stored in three addresses, each holding 47,230 BTC. The specific addresses are:
- 1AsHPP7WcGnDLzxW2bUa2FcbJP3eZVEqpx
- 16eAGJEjqsUqngMfcysQECvp7TMU37P9gX
- 1HeHLv7ZRFxWUVjuWkWT2D5XFbXXvHoV68
Monitoring is recommended using Arkham’s Mt. Gox wallet interface.
Q9: Who are the repayment recipients, and how has the creditor structure changed over the years?
A9: The structure has changed. The Mt. Gox hacking incident happened many years ago, and related claims have circulated in the market for a long time. Many original creditors sold their claims to institutions specializing in bankruptcy claims.
Galaxy Research’s Alex predicts that about 20,000 BTC claims have been purchased by bankruptcy funds, with another 10,000 claims owned by the Bitcoinica BK exchange.
Q10: How can potential selling pressure be assessed?
A10: It depends on the selling expectations of the creditors who receive repayments.
Mindao predicts that since this incident has been ongoing for ten years and creditors are early participants in the crypto space (diamond hands), the psychological impact may be greater than the actual impact.
Alex made a similar prediction. Most institutions actively acquiring Mt. Gox claims are high-net-worth Bitcoin holders looking to accumulate positions at a discount rather than quickly trading for arbitrage.
Alex added that considering the lower liquidity in the BCH market and creditors’ lower faith in BCH compared to BTC, BCH is expected to perform relatively poorly after Mt. Gox repayments.