Mt. Gox repayments

A letter sent to Mt. Gox creditors yesterday has shed more light on the schedule for payouts. Since the Mt. Gox hack in 2011, creditors have been waiting for nine years and must have felt as though little progress was being made despite (or perhaps, because of) the rising Bitcoin price. Now, some clear dates have finally been reveleaded for when the first tranches of repayments are to be made.

Mt. Gox repayments will begin distributing Bitcoin on the 15th September

Although many had speculated that the repayments would start in August, it was confirmed in an announcement yesterday that Mt. Gox would begin to make payments two weeks from now, on the 15th September.

This is in accordance with the legal proceedings that have been taking place over the last few years, which have finally determined that repayments can be made to those creditors who filled out the necessary KYC and AML checks.

Many of these holders have been left extremely dissatisfied with the Mt. Gox situation.

At the time, Mt. Gox was one of the few exchanges in the world where it was possible to buy Bitcoin, and the educational resources in 2011 about self custody and due diligence were not up to the standard that they are today.

The lack of education in the Bitcoin and crypto space at the time proved problematic for those who entrusted custody of their coins with the exchange and subsequently lost everything.

What will the effect on the price of Bitcoin be?

It is likely that the extra supply on the market will cause the Bitcoin price to fall.  This could even happen preemptively as market participants prepare themselves for the potential sell off.

Ultimately, the cadence of tranches that are distributed and their respective sizes are important.

However, what is perhaps even more important is how the creditors will behave when they receive their coins.

Given that they have inadvertently become some of the most successful investors in the world in ROI terms as they were forced to hodl their BTC, it is understandable that they may be inclined to take some profits.  For many of these creditors, the amount of Bitcoin that they stand to earn will be a life changing amount.

Of course, these people have also been forced to endure several Bitcoin cycles now, and will be extremely familiar with the way the market works.

Given their deep knowledge of Bitcoin, it is quite feasible that many will choose to hold their Bitcoin since they appreciate the strength of the asset – albeit they will probably be more likely to take self custody in the future.

Are we near the end of the bear market?

Traditionally, bear markets in crypto last approximately a year from peak to trough. The 2018 bear market lasted exactly 365 days from Bitcoin’s high of $20k.

This cycle was slightly different in that there was a double peak, but assuming that this bear market doesn’t last significantly longer than the others, it is still likely that we have either bottomed out already or will have bottomed out before the end of the year.

Much as the Coinbase IPO market the top of the Bitcoin market at the time, it could be that news such as this marks the bottom of the bear market.

Nevertheless, the macro economic situation remains weak, there are potentially further interest rate hikes on the horizon and many large economies around the world are now in a recession.

The correlation of Bitcoin’s price to broader markets has become more pronounced as of late and is trading as a risk-on asset. This means that when the stock market falls, so does Bitcoin. The economy is extremely weak at the moment given a myriad of macroeconomic and sociopolitical factors.

The high degree of uncertainty isn’t good for markets, and the Mt. Gox repayments are adding even more uncertainty.

The ETH merge is also in September

September isn’t only a significant month for Bitcoin holders. The Ethereum merge is also happening in September, which means that Ethereum will move from Proof of Work to Proof of Stake.

The changing of the consensus mechanism has been a somewhat controversial topic given that it calls into question the immutability of the blockchain, will trigger further forks, and will make Ethereum highly centralised thanks to liquid staking providers like Lido.

Testnets have functioned without too much of an issue, so the developers are optimistic that there won’t be any bugs, but that is always a possibility and a risk.

The combination of uncertainty in Bitcoin, uncertainty in Ethereum, and uncertainty over how central banks will respond to balancing inflation concerns with their other concerns is creating a lot of uncertainty in the markets at the moment.

Markets with high degrees of correlation are suffering because of it, and although Bitcoin has historically been largely uncorrelated, this isn’t so true over shorter time frames.

Some markets are faring better. Those that aren’t so correlated, such as projects in the P2E gaming industry, are doing extremely well despite the bear market.

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