UBS doubts large Bitcoin risk from Mt Gox payouts to clients

Upcoming payments to victims of Mt.Gox’s bankruptcy are not a cause for concern about the stability of Bitcoin’s price. The Block reports, citing UBS analysts.

Creditors by March 10 decide in what form and within what timeframe they are prepared to receive compensation.

UBS strategist Ivan Kachkovski explained that the option of an early lump-sum fiat payout would lead to sales of the first cryptocurrency. This could confirm “long-standing fear that Mt.Gox settlement would damage Bitcoin’s price.”

He noted that the trustee has managed to restore access to 142,000 BTC, 143,000 BCH, 69 billion Japanese yen (~$505,000) — “about 20% of the hack.”

The amount in the first cryptocurrency is equivalent to 16% of its daily turnover.

“The size may seem insignificant — it would amount to roughly 90% of the average volume offered over the last day, 28% over the last week and 10% over the last month”, the expert calculated.

As the active supply grows, all else equal, the risks of a price drop for the asset rise, the strategist explained.

Kachkovski questioned whether the exchange would see the full volume of compensation payments received by the affected clients. The analyst suggested that most of them are likely hodlers.

The two largest creditors of the exchange with 20% claims have chosen to be paid in cryptocurrency.

While other creditors may mount selling pressure, their actions will be “less concentrated,” the strategist added.

“Definitely, it’s difficult to assess to what extent the market has priced in Mt.Gox clients’ sales. Nevertheless, we think such news could be an additional factor driving BTC’s remarkable resilience recently”, concluded Kachkovski.

Mt.Gox, once the largest Bitcoin exchange, collapsed in early 2014. This followed reports of its alleged hacking and theft of 800,000 BTC ($480 million at the time).

The process of reimbursing creditors began in 2018. Since then, many in the community have warned that around 150,000 BTC (~$3.6 billion at the time of writing), which could be transferred to users of the exchange, could enter the market and trigger a crash.

Mt.Gox trustee Nobuyaki Kobayashi began preparations for compensation payments in July 2022.