Fear surrounding the repayments of defunct crypto exchange Mt. Gox is most likely overblown, according to analysts at digital asset management firm CoinShares.
Mt. Gox was the world’s largest Bitcoin exchange at one point before abruptly going bankrupt and “losing” most of its coins due to theft.
The exchange ultimately recovered most of its coins and has been in a lengthy bankruptcy process paying back its former customers, a large source of uncertainty in the market given the amount of potential sell pressure it could release if it were to sell its BTC to redeem creditors.
In a new report, CoinShares says that in order to minimize their tax burden, many of the Mt. Gox creditors are likely planning to hold on to most of their coins. When selling does occur, the firm notes that it will likely be spread out over many crypto exchanges, giving buy-side liquidity ample chance to absorb the sell pressure.
“If we adjust to the fact that creditors will receive around 15% of the bitcoin they held at the time, given bitcoin’s meteoric rise since then, they are up roughly 13,600%. For many, this will be an exorbitant tax event if they decide to sell immediately, and it is very likely that a large number of creditors will either choose to only sell a small portion of their holdings, or hold for the time being.
This is further supported by the fact that over the last 12 years, creditors have faced numerous offers from claims buyers (that would result in a USD payout). If a USD payout would have been compelling, many creditors would have already taken this. The bottom line is that there is no precise estimate to how many coins will be sold in the market following distribution.
The distributions will occur on a number of exchanges (Bitstamp, Kraken, Bitbank, BitGo, SBI VC Trade and others) at different dates throughout the month, softening the likelihood of large concurrent selling.”
CoinShares says that the very idea of the potential sell pressure is more of a problem than the actual selling will.
At time of writing, Bitcoin is trading at $60,146
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