Quicktake:

• Movement of bitcoin from Mt Gox wallets sparks market concern.
• Distributions could apply significant pressure on both BTC and BCH markets.
• Analysts offer differing perspectives on the potential market outcomes.
• Market anticipates larger sell pressure on BTC than likely to occur, according to Galaxy Research.

The recent movement of bitcoin from Mt Gox wallets has stirred anxiety among investors, prompting speculation about the impending distributions and their potential impact on the market. Former CEO Mark Karpelès has reassured the community that these actions are part of the preparation for distributions, which are set to occur by October 21. However, concerns linger regarding the significant pressure these distributions could exert on the market, particularly in light of conflicting analyses from research firms like K33.

Unlike some US bankruptcies, the Mt Gox case is shrouded in ambiguity due to its age and overseas jurisdiction, creating uncertainty surrounding the distribution process. K33’s earlier projections suggested that the payouts might affect bitcoin negatively, a sentiment reiterated following the recent wallet activity. Reports earlier this year indicated that creditors would receive distributions in-kind, with options to receive bitcoin or bitcoin cash instead of fiat currency.

While some anticipate a gloomy outlook for bitcoin and bitcoin cash once distributions are complete, Galaxy Research’s Alex Thorn offers a more nuanced perspective. Thorn suggests that creditors have options regarding their payouts, with some opting for earlier, smaller payouts, while others may choose to wait for larger ones. Thorn estimates that approximately 65,000 BTC/BCH will be distributed to 20,000 individual creditors between May and September. Thorn also believes that funds with significant claims are likely to distribute their BTC in-kind to LPs, with minimal selling expected from this group.

Thorn’s analysis is supported by the belief that many creditors are long-term bitcoin holders, reluctant to sell their assets hastily. However, the sheer volume of bitcoin involved in the payouts raises concerns about potential market impact, even with relatively small portions being sold. Despite this, Galaxy Research suggests that the market may be overestimating the sell pressure on BTC.

Both Thorn and K33 agree that bitcoin cash is likely to bear the brunt of the distributions. K33 suggests that BCH is the most exposed asset and could serve as an attractive hedge against Mt Gox distributions. Thorn attributes the potential impact on BCH to the fact that creditors did not originally hold BCH, as it was created post-bankruptcy. While original bitcoiners may have a higher sympathy for BCH, heavy shorting in BCH suggests significant selling pressure in the near term.

In conclusion, the Mt Gox distributions represent a significant event for both bitcoin and bitcoin cash markets. While uncertainties remain regarding their precise impact, analysts offer varying perspectives on the likely outcomes. As the distribution process unfolds, investors will closely monitor market dynamics to navigate the evolving landscape of crypto markets.

Galaxy Research’s Alex Thorn offered some clarity in a research note late Tuesday, noting that the creditors had options for their payouts and some could opt for earlier payouts that take a bit off the top to make it more timely. Those willing to be patient could opt to wait a bit longer and receive a larger payout at a later date. 

Thorn also believes that roughly 65,000 BTC/BCH will be returned to 20,000 individual creditors from late May to June, or even as late as September.  

Speaking to funds with large claims, Thorn said they’re “likely to distribute their BTC to LPs in-kind, and from speaking with several LPs in these funds, [he] does not believe there will be significant selling from this cohort.”

Overall, Thorn says the creditors he’s chatted with seem to be longer-term bitcoiners who wouldn’t be so willing to hit the sell button once the bitcoin is moved to their wallet. 

“Although it’s impossible to quantify, we believe the creditor base is comprised primarily of die-hard bitcoiners. Thousands of these creditors have waited 10 years for payouts and resisted compelling and aggressive claims’ offers during that time, suggesting they want their coins back,” he wrote.