CoinShares Analysts Dismiss Fears Over Mt. Gox Repayments

Analysts at digital asset management company CoinShares believe that concerns about the repayments from the now-defunct cryptocurrency exchange Mt. Gox are exaggerated. Mt. Gox, the biggest Bitcoin exchange in the world, declared bankruptcy after allegedly “losing” the majority of its currency to theft. Subsequently, the exchange has retrieved a substantial amount of its assets and is currently engrossed in an extensive bankruptcy procedure with the objective of compensating its previous clients. Because of the possible pressure to sell resulting from these repayments, this procedure has created market uncertainty.

Limited Sell Pressure Expected

CoinShares analysts suggest that many Mt. Gox creditors plan to hold onto their coins to minimize tax burdens. When sales occur, they will likely spread across multiple crypto exchanges, allowing buy-side liquidity 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.”

CoinShares highlights that over the past 12 years, creditors have received numerous offers from claims buyers, which would result in a USD payout. The fact that many have not accepted these offers suggests they are not in a rush to liquidate their holdings. The firm states, “The bottom line is that there is no precise estimate to how many coins will be sold in the market following distribution.”

Moreover, CoinShares notes that the distributions will occur across various exchanges such as Bitstamp, Kraken, Bitbank, BitGo, and SBI VC Trade. These staggered distributions will mitigate the likelihood of significant concurrent selling. CoinShares concludes that the notion of potential sell pressure is more problematic than the actual selling will be.

As of now, Bitcoin is trading at $58,853, reflecting a slight downward movement in the market despite anxieties about Mt. Gox repayments. The firm’s analysis provides a reassuring perspective, suggesting that the market impact may not be as severe as feared.