Analysis of MtGox Bankruptcy Case and Its Impact on the Bitcoin Market

MtGox, as one of the earliest and largest Bitcoin exchanges, declared bankruptcy after suffering a major security incident in 2013. After years of litigation, asset compensation is currently underway. This article will analyze the progress of the MtGox bankruptcy case and its potential impact on the Bitcoin market.

Bankruptcy Case Background

MtGox was established in July 2010 and was once the world's largest Bitcoin exchange, with trading volume exceeding 80% at one point. In 2013, the platform suffered a hacker attack, resulting in the loss of 850,000 Bitcoins, which led to its bankruptcy. Later, about 200,000 Bitcoins were recovered, of which 60,000 were used to pay various fees, and the remaining 140,000 were used as compensation assets.

Compensation Plan

The compensation plan passed in 2021 shows that creditors can receive approximately 23.6% of the original debt in assets. The proportion of those choosing a one-time early compensation is 21%. The compensation assets consist of 5-10% cash and 90-95% Bitcoin.

The compensation process is expected to take 2-3 months. Five designated exchanges will receive and distribute Bitcoin to creditors, and the processing times vary by platform. The deadline for one-time advance compensation is October 31, 2024.

Current Progress

On July 5, 2024, 47,000 Bitcoins were transferred out of the MtGox account, with 1,545 Bitcoins transferred to a certain exchange for compensation. As of July 12, there are still 138,000 Bitcoins in the MtGox account, and the main selling pressure has yet to enter the market.

Potential Market Impact Analysis

1. Analysis of Creditor Sale Behavior

Not all creditors will sell all their Bitcoins. The original creditors made about 24 times their investment, and even the debt acquirers have more than 10 times returns. Investors who are bullish on Bitcoin in the long term may continue to hold.

2. Estimate of Selling Pressure Scale

If 75% of the creditors accept early compensation, the actual Bitcoin used for repayment is about 94,117 coins. Based on sell-off ratios of 30%, 50%, and 70%, and a sell-off period of 1-3 months, the average daily sell-off volume is between 940 and 2,200 coins.

3. Comparison with the German government's sell-off

The German government sold approximately 43,700 Bitcoins in 23 days, causing a maximum daily drop of 19%. The selling pressure from MtGox is comparable and may have a similar impact.

4. ETF Demand Analysis

The demand for Bitcoin ETFs is insufficient to fully offset the selling pressure. During the German government's sell-off, the average daily net inflow for the ETF was only $43 million, far below the scale of the sell-off.

Conclusion

1. If the MtGox compensation is completed within a month, the market may face pressure similar to the German government's sell-off, and the price of Bitcoin may further decline.

2. If the compensation lasts for 2-3 months, the daily selling pressure will be relatively small, but it may lead to a period of price fluctuations.

3. When MtGox massively transfers Bitcoin to the exchange, it may trigger a panic sell-off. However, the impact of individual decentralized sales may be relatively small.

Overall, the MtGox compensation will put some pressure on the Bitcoin market, and investors should closely monitor relevant trends and manage risks.