UBS analysts don’t anticipate major fallout from Mt. Gox repayments
According to UBS strategists, the expected repayments from the Mt. Gox bankruptcy may not hurt the Bitcoin price.
BTC/USD 4-hour chart | Source: TradingView
At the end of February, cryptocurrency values were barely moving. TradingView said Bitcoin was trading relatively unchanged at just about $23,468. For the previous week, the cryptocurrency price has fluctuated just slightly, failing to hold onto levels above $24,000.
The process of liquidating the insolvent Japanese exchange Mt. Gox could be a key event for the Bitcoin price movement. Creditors are about to receive part of their money back after a process that has lasted almost ten years, according to UBS strategist Ivan Kachkovski.
Creditors have several alternatives under the existing scheme for how and when to make payments.
UBS says Mt. Gox repayments are unlikely to destabilize the Bitcoin price
“The most important ones are, first, whether to take an early lump sum payment or wait for further proceedings and additional asset recoveries and second, receiving funds in fiat or crypto,” Kachkovski said. The deadline to select a repayment option is currently set for March 10, and payments could commence in September of this year.
Kachkovski notes the early lump sum option with fiat repayments would result in the exchange selling bitcoin to raise the requisite cash and could give authority to the “long-held fear that Mt.Gox redemptions would hurt bitcoin’s price,” he added.
Importantly, given that the exchange has only retrieved about 142,000 BTC, with 143,000 Bitcoin Cash and $505,000, or “about 20% of the attack,” it won’t be more than 700,000 BTC that are destroyed.
He said the exchange’s Bitcoin holdings account for 16% of the most recent daily trading volume. This may appear small, but according to him, it would represent “90% of average supply active within the past day, 28% in the last week, and 10% of the last month.” The Bitcoin price tends to decline as active supply rises.
Most of this is unlikely to reach the market because most early adopters still believe in cryptocurrencies, Kachkovski continued. According to recent sources, two of the exchange’s major creditors, representing 20% of claims, chose the cryptocurrency compensation. He pointed out that although fresh supply would enter the market, this suggests it would be less concentrated.
“It’s certainly difficult to estimate the extent to which the market has been pricing massive sales coming from Mt.Gox. However, we think such news could have been an additional factor for—what we believe could be mainly retail-led — BTC’s surprising resilience of late,” Kachkovksi’s note concluded.
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