The Bitcoin price fell this week, dipping below $55,000 for the first time since February after the now-defunct Mt Gox exchange began distributing billions in owed funds.
Mt Gox announced it has begun repaying creditors, ending years of waiting after its 2014 collapse. The Japan-based exchange will distribute about $9 billion worth of Bitcoin, Bitcoin cash and fiat currency.
The news prompted a heavy selling pressure on Bitcoin, which fell more than 6% on Friday to close at $54,000. The broader Bitcoin and crypto market lost more than $170 billion in 24 hours amid the declines.
Thursday evening, Mountain Gox moved approximately 47,000 Bitcoin worth nearly $2.7 billion from cold storage wallets to a separate addressWhile intentions remain uncertain, the transfer raised concerns that creditors could sell off some of the recovered coins.
The payouts come after lengthy bankruptcy proceedings for Mt Gox, which suffered a massive hack in 2014 that wiped out 850,000 bitcoin. At the time, it was the largest cryptocurrency exchange, processing 70% of all bitcoin transactions.
The repayment of creditors marks a significant step toward resolving Mt Gox’s decades-long insolvency. However, the influx of previously lost coins threatens to shift the dynamics of supply and demand.
Some analysts estimate that selling pressure from payouts could push Bitcoin’s price down as much as $50,000 in the short term. Continuous transfers of the German government have also had an impact on the market.
Others, however, argue that the amounts are equivalent to a small fraction of daily Bitcoin trading volumes. They say that most of the creditors are long-term investors who are unlikely to dump their assets en masse, limiting the impact.
Despite this, analysts generally expect significant volatility between Mt Gox’s distributions and the start of German government stock sales in July.