The crypto winter might get worse as the latest news of Mt. Gox surfaced ahead of the forthcoming Fed meeting. On July 6, attorney Nobuaki Kobayashi, who was appointed trustee in the reorganization of Mt. Gox, confirmed that he was prepared to repay the account holders.
150,000 BTC To Be Unlocked
Mt. Gox’s repayment came as good news for investors whose accounts were attacked 8 years ago. It just did not show up at a very good time – the market winter.
A major selloff may be on the way with 150,000 BTC unlocked from Mt. Gox. It will eventually put more pressure on the market which seems poised to take another crash.
Mt. Gox was once the largest cryptocurrency exchange in the market, accounting for over 70% of Bitcoin transactions across the globe. Its fame was quickly on hackers’ targets, and so are its cybersecurity flaws.
An Old Story is Still Relevant
The first attack happened in 2011 when hackers stole customers’ login details on the exchange to transfer Bitcoin to their private wallets. The incident signaled the start of further attacks on the exchange.
In the same year, additional thousand Bitcoins were stolen due to the network protocol’s vulnerability.
Mt. Gox’s security system was clearly the weakest point, leading to an infiltration in which attackers changed the price of Bitcoin on the website to 1 cent, leading to a rush to buy Bitcoin at fraudulent prices.
By February 2014, hackers had seized 740,000 Bitcoins from customers of Mt. Gox and 100,000 Bitcoins from the company itself, all worth $460 million at the time.
This event caused Mt. Gox to be shut down and it filed for bankruptcy protection in Japan, the exchange’s headquarters.
The collapse of Mt. Gox led to a sharp drop in the price of Bitcoin that year, prompting regulators to step in.
The Mt. Gox matter was not resolved under bankruptcy law at the time, therefore investor lost funds are also irrecoverable. It took years for Bitcoin and the entire crypto industry to recover from the reputational damage this event caused.
It appears that investors who lost money are set to receive BTC back, more than 8 years after Mt. Gox went down. In fact, the payback plan was approved by the Japanese Court in 2021.
However, Mt. Gox hasn’t yet released BTC as expected due to the effect on the market. Of the 850,000 BTC lost to hackers attacking Mt. Gox, only 150,000 BTC has been recovered.
Analysts also noted that the Bitcoin price at the time was a fraction of its current $20,900. This can prompt the receiver to immediately sell a large amount of BTC in the market, putting pressure on the BTC price.
It might explain why in the official announcement, Kobayashi did not give a specific date to start returning BTC to investors.
Will the Bitcoins Hit the Market?
The compensation process of Mt.Gox is also fairly transparent. The trustee will inquire about the victim’s name and address in order to transfer money.
Additionally, Mt. Gox sent creditors notices of repayment. Depending on the preferred payment method of the creditors, compensation will be given in cash, Bitcoin Cash, or Bitcoin.
Ahead Of Fed Meeting
Many cryptocurrency skeptics warned of further losses in light of Mt. Gox’s return. Others, however, stay bullish on the impact of the event.
What we should be concerned about, according to Joe DiPasquale – CEO of bitcoin and cryptocurrency hedge fund BitBull Capital, is the upcoming Fed meeting on July 26 and 27.
US Federal Reserve (Fed) officials emphasized in the minutes of the June meeting that the central bank needs to curb inflation, even if it means slowing down economic growth.
The policymakers also signaled that they would raise interest rates by 50 or 75 basis points at the July meeting. Last month, the Fed decided to raise interest rates by 75 basis points – the highest since 1994.
These crosscurrents could lift Bitcoin in the short term, but regardless of Mt. Gox, the market looks like it is in rough shape for bulls.