Bitcoin has struggled to make gains in 2018, and the past few days have seen values heading rapidly lower. Unfortunately this has translated to losses across the entire cryptocurrency markets, with Ethereum, Litecoin, Ripple, Bitcoin Cash, and pretty much every cryptocurrency following Bitcoin lower.
While many have been scratching their heads, wondering why the cryptocurrency market remains so fragile, analysts may have an answer. The recent sharp drop is likely attributed, at least in part, by the sale of nearly 40,000 Bitcoins by a Mt. Gox trustee.
Why Mt. Gox is Selling
Mt. Gox was a Tokyo-based cryptocurrency exchange that was formed in 2010, and by 2014 it was responsible for roughly 70% of global Bitcoin transactions. It’s fortunes turned and declined drastically however, after a hack caused roughly 850,000 Bitcoins to be stolen from Mt. Gox in the largest Bitcoin hack ever.
Mt. Gox was forced into bankruptcy following the theft, and while some 200,000 of the Bitcoins were recovered, but creditors are still trying to reclaim their missing money. And here’s where the troubles begin. It appears that one Nobuaki Kobayashi, a trustee and lawyer for Mt. Gox has been selling the remaining Bitcoin to satisfy creditors. In fact, beginning in December 2017 and continuing through this past week he has sold 35,841 Bitcoin and 34,008 Bitcoin Cash. That’s $400 million worth, and some are claiming it’s this selling that has depressed the price of Bitcoin so drastically.
Even worse is the fact that Mr. Kobayashi still controls roughly 166,000 Bitcoin, nearly 5 times the amount already sold, and worth over $1.5 billion at the current Bitcoin price.
There could be good news for the short term though. The next Mt. Gox bankruptcy proceeding isn’t scheduled until September 18, 2018. This makes it unlikely that the additional 166,000 Bitcoin will be dumped on the market before that date, which could provide some relief for the cryptocurrency markets.
What’s Happened So Far?
The details of the transactions were published earlier this week, and a detailed examination shows that nearly half the Bitcoin – 18,000 BTC – was sold on February 5, 2018. The timing of the sales corresponds closely with drops in Bitcoin price since mid-December. There’s little doubt that the sales contributed to further selling in a market already plagued by regulatory scares, hacked exchanges and claims of fraud.
Mr. Kobayashi defended the sales, saying:
“As a result of the consultation with the court, I considered it necessary and reasonable to sell a certain amount of BTC and BCC at this point and secure a certain amount of money for distribution resources, and thus, I sold the amount of BTC and BCC above. I made efforts to sell BTC and BCC at as high a price as possible in light of the market price of BTC and BCC at the timing of sale.”
Next Steps for Mt. Gox Trustee
With the next court hearing six months off there is a chance that the selling from the trustee will at least pause. This is supported by the fact that the roughly $400 million already generated closely matches the claims made against Mt. Gox. Even so, Mr. Kobayashi has said it may be necessary to liquidate more of the holdings and he has already petitioned the courts for permission to do just that.
It’s been 4 years since the Mt. Gox hack, and it is still hurting markets today. With 166,000 Bitcoin still to be sold we can imagine that pressure on Bitcoin price could remain, although that will hopefully be offset somewhat by the future transparency of sales by the Mt. Gox trust.