Will the Mt. Gox Bitcoin Release Cause Liquidation?

I remember visiting one of my friends as a child. 

If I hadn’t been over in a while, he would usually show me the latest video game or action figure he had acquired. 

On one occasion it was something a bit different…a card game. One that utilized various sets that represented creatures, artifacts, and spells that could be used against your opponents. 
 
I’m, of course, talking about Magic: the Gathering.
 
I played with him a fair amount but never collected the cards myself. In the following years, the game exploded in popularity with literally billions of Magic cards being produced. Some of the rarest cards have fetched tens and even hundreds of thousands of dollars recently. 
 
In 2006, during the height of its popularity, an avid fan by the name of Jed McCaleb started a website dedicated to the game. It was called Mt. Gox – short for “Magic the Gathering Online eXchange.” 
 
On it, people could trade Magic cards much like stocks.
 
During the summer of 2010, McCaleb read about a new digital currency called Bitcoin. During this time there really was no place to easily acquire the cryptocurrency. Most of it was obtained through mining and it was largely stored on paper wallets. It seemed out of reach for normal people.

Will the Mt. Gox Bitcoin Release Cause Liquidation?
 
Recognizing that people needed an exchange to trade Bitcoin and other currencies, McCaleb revamped the Mt. Gox website and turned it into the world’s first Bitcoin exchange. 
 
Bitcoin sold for well under $1.00 during this time. 
 
By 2014, Mt. Gox was the world’s largest crypto exchange handling 70% of all BTC transactions.
 
But then something happened.
 
On Feb 7 2014, Mt. Gox froze all withdrawals. The reason for this was not obvious.
 
Apparently, hackers messed with the withdrawal hash, making it appear that their withdrawals failed when they had in fact gone through. These hackers would contact customer support to get a successful withdrawal, essentially getting two for one. 

Doing this, they were able to withdraw 850,000 BTC (4% of the total supply) from the exchange before anyone figured out what had happened.
 
This was the equivalent of $473 million at the time or $18.1 billion today.
 
In 2021, a rehabilitation plan was proposed to reimburse the Bitcoin holders on Mt. Gox. On July 6 of this year, a statement was released that indicated Mt. Gox customers would get their Bitcoin back.  The current balance is roughly 142,000 BTC (worth roughly $3 billion) that people will be able to accept as payment or the equivalent USD value starting in August. 
 
After eight years these people are finally getting their Bitcoin back. And there’s a risk that if everyone redeems their payout in BTC and sells it immediately we could see the price drop rapidly.
 
I don’t think this will happen for several reasons. 
 
First, the payouts are not being deployed all at once, so any Bitcoin selling will be done over a broader timeframe.
 
Second, many people will be smart enough to hold their Bitcoin as we are at or near a cycle bottom. Smart investors would rather hold their Bitcoin and have $100,000 or more a couple years down the road.
 
Third, hedge funds purchased many of these settlements from Mt. Gox customers at a highly discounted cash value over the past several years. These hedge funds will almost certainly be holding this BTC over a longer time period knowing full well its price will rise. 
 
That’s not to say this won’t create some downward price movement for the crypto market this month. Combined with the overall macroeconomic environment, it has me feeling pretty confident that we are near the bottom. 

In Crypto Cycle I’m seeking out the best crypto projects that will see outsized gains in the upcoming bull market. 

Bitcoin is certainly one of them, and we’ll likely be deploying more of our $50,000 real-money portfolio into it over the coming months. 

Members get to follow along in real time with every move I make in the crypto markets while also getting critical education on various coins, exchanges, and safe storage practices, which are hugely important given the shutting down and freezing of exchanges from Mt. Gox all those years ago to others you may have heard about recently like Celsius. 

Click here to learn more.

Chris Curl

Chris Curl
Editor, Daily Profit Cycle