Last week, the cryptocurrency market started to lose ground in an alarming decline, and the value of Bitcoin fell to the $55,000 level. However, BTC has quickly recovered and at the moment the price of bitcoin has rebounded and continues to rise, defying earlier predictions of a localized down cycle.

Some people believe that the market drop is due to the Mt. Gox cryptocurrency exchange beginning to recover losses, 10 years after its bankruptcy. Although this will only be a fraction of the funds lost by users, many predict a serious impact of BTC on the cryptocurrency market because the price of the asset has increased many times since the collapse of the exchange.

Thus, according to market data, most of these refunded holders sell the BTC shares returned to them to compensate for the losses incurred during the incident. The impact on the crypto market will depend on how many of them there are. 

Introduction to Mt. Gox 

The history of Mt. Gox did not begin with cryptocurrencies. In 2007, Jed McCaleb, the future co-founder of crypto projects Ripple and Stellar, registered the domain name mtgox.com. On it, he launched a platform called "Magic: The Gathering Online Exchange" for trading cards in the popular fantasy game. The service name is abbreviated as Mt. Gox.

After learning about cryptocurrency in the summer of 2010, McCaleb decided to transform Mt. Gox into a Bitcoin exchange. A year later, McCaleb sold it to the French developer Marc Karpeles, who was living in Japan, motivating his decision due to a lack of time to develop the project.

According to Rolling Stone, Karpeles received Mt. Gox for free. In exchange, he was obliged to pay McCaleb 50% of the profits in the first six months of ownership and 12% in the future.

Mt. Gox has quickly gained popularity. In 2011, the platform's user base numbered tens of thousands of clients, and by 2013, the volume of Bitcoin trading on the platform amounted to approximately 70% of the global trading volume.

Recap of the Mt. Gox collapse

Exchange's fortunes took a dramatic turn in 2014 when it abruptly halted all Bitcoin withdrawals, citing a technical issue known as "transaction malleability." The Mt. Gox exchange has experienced a number of problems, including hacks and Bitcoin thefts. 

In early 2014, Mt. Gox suspended operations and filed for bankruptcy, announcing that approximately 850,000 Bitcoins belonging to customers and the company had been stolen.

Post-collapse developments

The collapse of Mt. Gox emphasized the importance of security in cryptocurrency exchanges. After this incident, the industry began to focus on protective measures, including improved security and regulation.

The event also brought regulators’ attention to cryptocurrencies worldwide, leading to tighter regulations and the need for exchanges to meet new standards.

The issue of recovering lost Bitcoin remains relevant. After litigation and restructuring, some lost funds were found. Payments to creditors began in 2021, bringing public attention to the process of restoring justice. Payouts to victims could have a significant impact on the Bitcoin market as significant amounts could be sold, leading to price fluctuations.

Recent events sparking interest

A Mt. Gox spokesperson announced that Bitcoin (BTC) and Bitcoin Cash (BCH) compensation payments will be made in July 2024. This marks a major milestone in the long rehabilitation process, bringing hope to investors affected by the platform's collapse.

On July 24, the trustee published a detailed notice outlining the final stages of preparation under the Rehabilitation Plan. The repayment strategy focuses on technical security, compliance with international financial regulations, and accurate communication with exchanges to verify all necessary details. Moreover, Mt. Gox Trustee intends to prevent potential problems in the repayment process that thousands of creditors are expecting.

Repayments will be made in a certain order, depending on the completion of the information exchange and confirmation with the involved cryptocurrency exchanges. The goal of this streamlined implementation is to ensure that every creditor receives its rightful share transparently.

Recently, in May, there were significant movements of Bitcoin, including transfers from the Mt. Gox wallet through various channels. This activity has sparked concern and speculation in the crypto community about potential market implications. The assets earmarked for distribution are significant, including 142,000 BTC, 143,000 BCH, and 69 billion Japanese yen. The scale of these assets underscores Mt. Gox's previous influence on the market and the significant impact this redemption could have on cryptocurrency markets.

Experts in the crypto community are speculating on the potential market’s reaction to this influx of digital assets. Some predict strong market volatility, particularly if lenders sell large volumes of BTC and BCH.

Lessons learned and cryptocurrency market impact

The cryptocurrency exchange Mt. Gox, formerly the world's largest Bitcoin trading platform, announced plans to begin compensating affected users this July. This event caused the Bitcoin price to plummet to $61,000 as the market fears a massive sale of Bitcoins to pay off debts.

Similar warnings were issued before, such as in 2017, but payments were never made. In fact, no closed cryptocurrency exchange has ever compensated its customers. Therefore, it remains unclear whether payouts will take place this time around or if this is another negative news backdrop that could cause the market to fall.

Even if payouts are made, it is unlikely that those affected will receive coins at face value. Most likely, a special conversion mechanism was developed to minimize exchange losses.

Following the incident, exchanges implemented stricter security measures, such as storing customer funds in cold storage and implementing stricter know-your-customer (KYC) and anti-money laundering (AML) protocols. Regulators have also increased their supervision of the cryptocurrency industry, with many countries enacting new laws and regulations to safeguard investors and prevent large-scale thefts.

The collapse of Mt. Gox highlights the necessity for greater transparency and accountability in the crypto ecosystem. The ongoing process of repaying customers affected by theft, as well as the unanswered questions surrounding it, has emphasized the need for clear and efficient procedures when dealing with such incidents in the future.

Future outlook

The topic of MT GOX is an important one right now, as many believe that news about it will affect Bitcoin. As a consequence of at least that already, they will affect it, but let us look at what influential experts and analysts are saying about it.

Earlier, Sam Callahan of Swan Bitcoin talked about the exaggerated impact of Mt. Gox payments on the cryptocurrency market. The former owner and head of the Mark Karpeles exchange also does not expect mass sales of distributed coins by the platform's clients.

Against the background of Bitcoin’s return to levels above $60,000, crypto community participants shared their forecasts. Many believe that the risks associated with the repayment of the Mt. Gox debt are highly exaggerated. For example, this opinion is held by the head of the Galaxy Research Alex Thorne. He believes that the majority of BTC, in which the crypto exchange will return to owners, will not be sold, which means that the crypto market is unlikely to face a large-scale sell-off. At the same time, Thorne noted that the situation with Bitcoin Cash (which is also part of Mt. Gox’s debt) is worse; in contrast, many people will hurry to get rid of this asset.

Neil Jacobs, a well-known entrepreneur in the crypto community, shared a similar opinion. He also believes that not all investors will rush to sell Bitcoin. Jacobs is sure that there will be buyers for the coins that will be released in the market.

Analyst Michael van de Poppe, in turn, noted that, against the background of the hype around Mt. Gox, Bitcoin falls into the oversold zone. From the perspective of technical analysis, this situation may indicate the formation of an unfairly low asset price.

Conclusion

The Mt. Gox scandal highlighted the important need for transparency and accountability in the cryptocurrency industry. However, due to the extended deadline and complex nature of Mt. Gox cryptocurrency transactions, creditors must remain patient as the process continues. The ongoing restitution process for Mt. Gox is intricate and involves thorough verification and distribution procedures. Despite facing delays and setbacks, recent actions by the trustee show a determined effort to bring closure to one of the most significant events in cryptocurrency history.