It has not been easy this year for Bitcoin (BTC). Like most financial assets globally, its price is tumbling. To make matters worse, at least in the case of the most famous cryptocurrency, there are storm clouds on the horizon that could further hit its short-term price.
More and more specialized sites warn that a massive sale of BTC for 3 billion dollars could take place in the coming weeks. And we already know: when the sale exceeds the purchase volume, it is most likely that the price will fall, erasing with a stroke of the pen a rise that took months.
The story behind this possible massive offering is fascinating. It includes hacks, the fall of the most important exchange in the world at the time, crimes punishable by imprisonment and partial recoveries.
Let’s start with the explanation of the case, which was born 8 years ago and today, surprisingly, shakes the market again.
Hacking and millionaire losses in a still very green crypto market
Mt. Gox was a Bitcoin exchange founded in 2010 in Tokyo, Japan, by the American programmer and entrepreneur Jed McCaleb, who sold it to the French businessman Mark Karpelès, based in Japan since 2009.
Karpelés managed to increase the volume traded by Mt. Gox exponentially to 20,000 trades per day. At that time, BTC was trading at approximately one dollar per unit. However, the mismanagement of the exchange’s security, combined with the indomitable growth that the market was experiencing, caused Mt. Gox to report the theft of 25,000 BTC from its system in June 2011.
At the time of that first big hack, the price of BTC was around $16. Therefore, the theft could be estimated at 400 thousand dollars. Today, after the marathon rise of the cryptocurrency, it would be about 525 million dollars.
As you know, that was just the beginning. In March 2013, various registry errors in their system caused a 23% BTC price collapse. In April of the same year, also due to its own errors, the exchange had to suspend BTC operations on its platform and generated an extra drop of 50%. In June, it temporarily suspended BTC withdrawals and caused many of its customers to panic, only to re-enable them later.
Despite these incidents, interest in Bitcoin continued to grow and so did the exchange business, to the point that in December 2013, with the cryptocurrency trading for the first time at $1,000, 70% of the total volume traded daily globally was concentrated on the Mt. Gox platform. It wasn’t long before everything exploded into the air…
In early 2014, several exchange clients reported long delays when they wanted to withdraw their BTC. On February 7, Mt. Gox officially suspended the withdrawals, citing “the need for a technical review of the processes.” Three days later, those responsible for the exchange declared that a bug or technical failure in its software had altered the details of the transactions.
Despite a promise by the directors to restore withdrawals soon, on February 20 the Mt. Gox site ceased to be active. Finally, on February 24, a document was leaked that said that the exchange was insolvent, since it had lost 850 thousand bitcoins in a hack (750 thousand were from its clients and 100 thousand were its own). This situation, dramatic for many, generated a sharp drop in the price of BTC, which fell from 850 dollars to a minimum of 325 dollars towards the end of 2013.
Does the story end at this point? No way.
A “miracle” with possible consequences
Surprisingly, on March 20, 2014, Mt. Gox announced that it had found 200K of the 850K stolen BTC. He reported that he had created a trust in Tokyo to distribute the majority among his clients affected by the robbery. During the following years, legal obstacles meant that little progress was made in the distribution, but in November 2021 Mt. Gox received authorization from the Japanese Justice to move forward with its plan to return the recovered BTC. All of this brings us to the present.
Last month, creditor clients received an email announcing that the trust was preparing payment transfers, which would be in USD, BTC or BCH (Bitcoin Cash), depending on the client’s preference. In the balance sheets of Mt. Gox there is talk of a total of 137 thousand BTC to be distributed. At current value, they are equivalent to about 3 billion dollars.
conclusion
Now, the million dollar question is: What will those who soon begin to receive these funds do, especially if they receive them in BTC? It seems difficult for the majority to retain cryptocurrencies, with which the supply of BTC could increase in the market and impact, at least momentarily, its price. The higher the supply, the steeper the drop could be.
However, there are reasons to be optimistic: let us think that these investors have already passed (by force, since they did not have available to operate their holdings) through several important cycles of boom and bust of Bitcoin, although, thanks to the “supercorralito” of Mt. Gox, were able to discover the benefits of long-term investing in a well-funded asset.
Thus, they have been able to observe how BTC went from trading at 1,000 dollars during the hack to more than 21,500 dollars at the time of writing this note, not long ago going through the historical peak of 69,000 dollars per unit.
Will such a journey be able to stimulate a part of the investors to maintain their positions in BTC and even increase their holdings with more savings and capital by once again trusting both the cryptoactive and its blockchain?
Bitcoin is also likely to regain devotees, although many will opt for the “bird in the hand” instead of the “hundred flying” and, once cashed in, will sell their entire position almost instantly.
The answer will be given by the facts. Therefore, it is likely that we will know it thoroughly in the next 3 months, when we see the direction that the price of BTC takes.
In any case, it is the star cryptocurrency with an enviable level of resilience: on several occasions, it has managed to survive collapses of over 80%. Whatever falls, if it falls again, this does not have to be the exception.