Japanese cryptocurrency exchange Mt. Gox, which failed 10 years ago, is about to return $9 billion U.S. worth of Bitcoin to its former investors, a situation that could lead to price volatility.
Mt. Gox collapsed in 2014 after a series of thefts cost the exchange 650,000 to 950,000 Bitcoins, worth $59 billion U.S. at current prices.
The exchange is now planning to repay its 20,000 creditors following a drawn-out bankruptcy process that involved multiple legal challenges. Disbursements will be primarily in Bitcoin.
While the repayment is good news for former investors who have waited years to be made whole, the compensation comes as the price of Bitcoin has risen more than 10,000% in the last decade.
Analysts are warning that the repayment to Mt. Gox investors will likely translate to huge sales of Bitcoin over the coming weeks as investors lock in their massive gains.
This could lead to volatility in the price of Bitcoin, which is currently trading at $62,500 U.S. per digital token. When Mt. Gox shutdown in February 2014, Bitcoin was trading at $600 U.S.
Analysts at JPMorgan Chase (JPM) are warning of negative price action in Bitcoin following the Mt. Gox disbursement.
In a note to clients, JPMorgan said that customers of the former crypto exchange will likely be inclined to sell at least some of their Bitcoin to profit from the huge gains.
However, more optimistic analysts are saying that the impact of the Mt. Gox repayment has already been priced into Bitcoin’s current price.
While Bitcoin’s price is up 42% on the year, it has declined 8% in the last month and been trending lower since a halving event this April that reduced the available supply of the cryptocurrency, and the rewards for mining it, by 50%.
