Fears of a major Bitcoin price drop due to the upcoming Mt. Gox exchange repayment plan might be overblown, according to a recent report by Galaxy Digital. The cryptocurrency investment firm believes the market is anticipating a much larger sell-off than what is likely to occur.
Mt. Gox, once the world's leading cryptocurrency exchange, suffered a devastating hack in 2014, resulting in the loss of hundreds of thousands of Bitcoins belonging to its customers. After years of legal wrangling, a rehabilitation plan was finally approved, allowing Mt. Gox to begin returning these lost assets to their rightful owners.
The news sparked concerns that a sudden influx of Bitcoin into the market could lead to a significant price drop as creditors sell their holdings. However, Galaxy Digital's head of research, Alex Thorn, estimates that only a fraction of the total recovered Bitcoin will actually hit the open market.
Thorn suggests that a large portion of creditors opted for an "early" payout, receiving a slightly reduced amount in exchange for faster access to their funds. This strategy significantly reduces the overall amount of Bitcoin expected to be immediately sold.
Furthermore, a significant amount of the recovered Bitcoin is owed to entities other than individual creditors, such as claims funds and Mt. Gox itself. These entities are less likely to immediately sell their holdings, further mitigating the potential sell pressure.
Market May Have Overreacted
Galaxy Digital's report suggests the market may have overreacted to the Mt. Gox news. While some selling is likely to occur, it may not be as dramatic as some analysts initially feared.This is positive news for Bitcoin holders, as it reduces the risk of a sharp price decline in the near future. However, it's important to remember that the cryptocurrency market remains volatile, and other factors could still impact Bitcoin's price.
June 2024, Cryptoniteuae