8 years after the Mt Gox hack, 137k ($3b) worth of #Bitcoin could be flooded onto the market.
This has been dubbed the biggest “black swan” in $BTC history by some. What you should know about Mt Gox is this: An intriguing tale of lies, hacks, and dishonesty.
Mt Gox history
Mt Gox was first established by Jed McCaleb ( @jedmccleb) in 2006 as a marketplace for trading Magic: The Gathering Online cards (hence the acronym MTGOX). Before Jed went on to other endeavours, the website was only in operation for a few months.
In 2010, Jed began to show interest in bitcoin after some time had passed. Since there wasn’t a simple way for customers to swap $BTC at the time, he noticed a gap in the market.
He used the mtgox.com domain, which was still available, to formally introduce a BTC exchange. At a price equal to six months’ worth of earnings, Jed sold the exchange to Mark Karpelès (@MagicalTux) after ten months.
With Mark in charge, Mt. Gox increased its trading volume to 20,000 transactions per day in only a few short months.
Mt Gox was hacked and Bitcoin got Stolen
But things weren’t always easy.
In June 2011, Mt. Gox revealed that 25,000 $BTC were stolen via a compromised computer ($400k at the time), according to Bishr Tabbaa. Those Bitcoin would be valued at approximately $525,000,000 now.
The attacker then employed fictitious trading to briefly lower the price from $17 to $0.01, enabling them to acquire an additional 2k BTC in the process (using stolen customer wallets).
Mt Gox Controversies
Following that, Mt. Gox was involved in other severe disputes:
• A 23% crash was caused by an unintentional transaction log fork in March 2013.
• Trading was halted in April, which resulted in a 50% drop.
• Withdrawals were halted on June 20th; a $75 million lawsuit and US DHS warrant were filed in May.
Nevertheless, despite these problems, Mt. Gox’s trading volume exploded. By far the largest cryptocurrency exchange, it managed 70% of all trades in $BTC. At Mt. Gox, everything seemed to be going well in December 2013. Revenue was at an ATH, and Bitcoin had only recently crossed the $1k barrier.
Red flag for Mt Gox in 2014
Then, though, the unthinkable occurred.
Customer complaints began to increase in February 2014 as a result of the lengthy delays users were seeing when withdrawing Bitcoin. Mt. Gox formally halted withdrawals on the 7th, stating that they required a “clear technical picture of the currency procedures.”
On the 10th, they acknowledged discovering a “bug in the Bitcoin programme” that changed the data of some transactions. This basically allowed for the resending of bitcoins because the transactions were flagged as illegitimate. Transaction malleability is the cause of this kind of exploit.
Angry clients were left in the dark and unable to withdraw their Bitcoin for the following two weeks. On the 17th, The CEO Mark stated that they were “dedicated to solving this issue” and that “Mt. Gox should be able to begin withdrawals soon.”
But three days later Mark resigned from the @BTCFoundation board, and then Mt. Gox deleted all of their Twitter updates.
Their website was then unavailable.
A “crisis management” document that was published on February 24 showed that Mt. Gox was bankrupt after losing an estimated 850,000 bitcoins.
That is currently worth $18,000,000,000 (4% of the entire supply of $BTC).
Mt Gox formally filed for bankruptcy four days later. They eventually acknowledged losing 750,000 Bitcoins from their clients (including 100,000 of their own).
Recall the hack from 2011 I described earlier?
The Mt. Gox private key was “unencrypted and stolen back in 2011,” it came out. We have no idea how the hackers got hold of this key. There is a rumour that an insider may have helped.
This is when things really start to get interesting.
On March 20, 2014, Mt. Gox posted a message on their website claiming that they had “discovered” 200,000 of the 850,000 $BTC that had gone missing.
Nobuaki Kobayashi was chosen by the Tokyo District Court to serve as the rehabilitation trustee in 2015. He is in charge of overseeing the creditors’ reconciliation.
In the meantime, CEO Mark Karpelès was detained in August 2015 on charges of fraud and theft. He was revealed to have “stolen” $2.6 million in customer cash for his own use by tricking the Mt. Gox computers into showing false balances. He is currently incarcerated for 30 months.
Due to protracted legal actions and investigations, the Mt. Gox scenario remained unchanged for several years.
A Rehabilitation Plan for Mt Gox users
However, Mt. Gox and the Tokyo District Court formalised a “Rehabilitation Plan” in November 2021.
This strategy explains how to pay off creditors. Now we are in the modern era. Creditors received an email about payments on July 6.
The Rehabilitation Trustee is almost ready to make payments, according to Mt Gox.
Payments must be made to the creditors (in this example, Nobuaki Kobayashi), who is in charge of managing the rehabilitation process, by the rehabilitation trustee.
Their current holdings, according to the balance sheet, are 137,000 $BTC. That is worth almost $3 billion at the present price. Creditors can choose to get paid in USD, BTC, or BCH. Creditors are anticipated to begin getting money as early as August.
Fear in the market is Crazy!
There is widespread fear that the release of these funds could trigger a massive supply dump, which might have a considerable influence on the price of $BTC. Although a $3 billion dump sounds terrifying, there are a few things we need to keep in mind.
To begin with, not ALL debtors will sell their Bitcoin. Some people will keep holding. They have already gone through several cycles, and with decreasing $BTC prices, selling becomes less appealing.
The main psychological justification for creditors not selling is as follows:
They were compelled to retain an asset for a very long time, and the returns were enormous. As an asset, $BTC is considerably more “proved” now than it was when it was first purchased.
There’s one analysis is spreading like a fling about what can be an outcome of this mt gox event on the crypto market. lets have a look.
I don’t think there’s more to say regarding this image, I hope you figured it out. but, hey nothing is confirmed until its become reality… so let’s give it time!
The outcome of releasing 140K Bitcoins
It’s doubtful that the majority will decide to sell. But let’s assume for the sake of argument that the entire $3 billion is sold. Would this result in a crash of #Bitcoin?
Probably (in the short term).
Recent examples include the 80k $BTC dump by LFG, the forced spot sale of billions of dollars’ worth of assets by 3AC, and the ongoing massive dumps by miners. Due to these occasions, BTC worth billions of dollars has entered the market. The outcome? big price increase
LFG and 3AC, however, had a greater price impact than merely the selling because they also damaged sentiment and caused forced liquidations.
The worst has passed.
From what I said before, it’s clear that not all creditors will sell. Even if they wanted to, they couldn’t put all 137,00 $BTC on the market at once. Just like you wouldn’t totally ape into a position, a practical seller would be wise to DCA out of a position.
Therefore, even while the sale of debt by creditors will have some effects, it is unlikely to result in the type of catastrophic disaster that many have predicted.
That’s it for this time, I hope you liked such informative researched based content at CryptoSharX.