Four Myths About the Mt. Gox “Doomsday” That Could Sway the Market

Almost seven years have passed since the then-largest Bitcoin exchange Mt. Gox declared bankruptcy. Apart from its ever-expanding balance sheet, as another $1.2 million in fees was spent over the last six months, there are few updates on the progress made thus far, or what the money was spent on. Market participants are letting speculations run wild — some of which nearly crashed the DeFi market last week. Today, we are going to take a closer look, and possibly dispel some of the myths enshrouding the Mt.Gox rehabilitation plan.   

Kolin Burges, a self-styled cryptocurrency trader and former software engineer from London, holds up a placard to protest against Mt. Gox, in front of the building where the digital marketplace operator was formerly housed in Tokyo February 26, 2014. REUTERS/Toru Hanai

Myth 1: Nobuaki Kobayashi, the Mt. Gox trustee, will return the stolen coins to their rightful owners by Oct. 15, 2020. 

Oct. 15 was the proposed deadline for Kobayashi to submit the rehabilitation plan that will eventually kickstart the process of repaying Mt. Gox creditors. The fifth creditors’ meeting took place at the Tokyo District Court on Oct. 7, with few updates on the progress. In addition, an uncredited source (@cat-on-prague) on Twitter revealed that this deadline is likely to be pushed back, yet again, due to the immense number of unresolved cases related to non-exchanges. The next creditor’s meeting is scheduled to be held on March 24, 2021. 

Text

Description automatically generated
Source: @cat_on_prague

Myth 2: No news is good news. Since there is no press release on further extensions, the rehabilitation lawyer will submit the plan promptly before the stipulated deadline. 

The rehabilitation lawyer never announced the extension in advance. As evidenced by the screenshot below – the extension was announced just one day before the last deadline (July 1). As of Oct. 15, 8AM UTC, the trustee announced that the deadline for submission is being pushed back to Dec. 15, 2020

Source: Mt.Gox

Myth 3: Bitcoin, valued at round $400 at the time of the theft, is trading at around $11,000. Upon retrieving their lost tokens, creditors will most likely dump them back into the market, creating immense selling pressure which will inevitably drive the price down.

Mt. Gox creditors could only recover around 20% of their lost tokens, so the real costs are estimated at around $2,000 per token. In January 2020, Fortress increased its offer to buy Mt. Gox creditors’ claims at $1,300 per bitcoin, raising the real cost per unit to $6,500. Fairing against the current price, dumping seems as good as any high-yield investment strategies, but not nearly as high as people would expect. 

Some creditors may choose to dump once they get their coins back to increase liquidity, while others may hold until Bitcoin breaks another significant resistance and soars even higher in a near-zero-rate economic environment. The percentage of HODLers among Mt. Gox creditors can’t be determined yet, so it would be premature to conclude that the rehabilitation will most definitely sink the price of Bitcoin. 

Myth 4: The submission deadline is an ultimatum issued after multiple extensions over the past six years, so it has to be final. 

Unfortunately, it is not. Simply because there are a number of pending claims and unresolved disputes between Mt. Gox, CoinLab and Tibanne, which seriously hindered the rehabilitation process. Considering that no progress has been made thus far in resolving these claims, it’s no wonder that the Mt. Gox trustee filed for another extension.

As of Oct. 15, 8AM UTC, the Mt. Gox trustee officially announced that the submission deadline has been extended to Dec. 15, 2020.