Bitcoin (BTC-USD) price has slipped below $62,000 (£49,697) over the past 24 hours as investors eye a looming bankruptcy payout that could pose a substantial overhang on the digital asset’s price.
According to Coingecko data, the largest digital asset by market capitalisation has posted a decrease of over 1% and is changing hands for $61,182.
Mt Gox creditor payout
The defunct Mt Gox cryptocurrency exchange is set to distribute 142,000 bitcoins, valued at approximately $9.5bn, to creditors before the October deadline.
A civil rehabilitation trial granted creditors the option to receive their owed amount in cryptocurrency, instead of the fiat currency market price of bitcoin in April 2014, when the exchange filed for bankruptcy.
Analysts are concerned that the forthcoming distribution might lead to many creditors selling the bitcoin they receive on exchanges once it’s in their possession.
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Recently, creditors observed updates on their crypto claim accounts within the Mt Gox claim filing system. Some creditors have already received payments in fiat currency, prompting analysts to speculate that full bitcoin payouts may be imminent.
The Mt Gox cryptocurrency exchange collapsed following a hack in 2014. The trustees of the defunct exchange have set a 31 October deadline for reimbursing creditors.
FTX creditor payout
The collapsed FTX cryptocurrency exchange could also impact the cryptocurrency market. On Wednesday, the firm said that once it has sold off its remaining assets, it will have as much as $16.3bn (£13bn) to cover its debts to creditors, which stand at around $11bn.
The new CEO, John Ray III, who was tasked with navigating the fallen exchange through bankruptcy following its collapse in November 2022, said, “We are pleased to be in a position to propose a Chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts, plus interest for non-governmental creditors.”
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In contrast to the Mt Gox payouts, which will be in cryptocurrency, FTX creditors could potentially receive between $14bn to $16bn in fiat currency, pending bankruptcy court approval. DeFiance Capital CIO Arthur Cheong suggested that a portion of these funds may find their way back into the cryptocurrency market.
“Expect at least $3-$5bn of crypto-native liquidity to be injected back into the market,” Cheong said in an X post on Wednesday.
Bitcoin liquidations rise
The recent downturn in bitcoin prices has prompted a significant liquidation of long positions on cryptocurrency exchanges. The volatility has led to the liquidation of more than $32m in bitcoin positions over the past 24 hours, with the majority, over $21m, consisting of long positions.
According to CoinGlass data, the overall crypto market saw the liquidation of over $86m in long positions in the past 24 hours. This contributed to over $131m in total liquidations across major cryptocurrency exchanges.
Liquidations tend to occur during volatile price swings, such as unexpected downturns. When prices rise sharply, as recently observed in the cryptocurrency market, many traders may be compelled to liquidate their short positions due to the surge in asset values. This can intensify overall market volatility, set off a cascade effect and potentially cause a significant increase in price fluctuations.
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Speaking this week on Yahoo Finance’s The Morning Brief, Yahoo Finance reporter, Jared Blikre, noted that “last week saw the largest outflows from spot bitcoin ETFs to date.”
He added that bitcoin reacted in a “very characteristic” way. The digital asset dipped but then rose back above a key support level.
“I would say a low of $57,000 is a price you do not want to see if you’re a bitcoin bull. But if we are above, especially above the $60,000 mark, as we are now, that is a pretty bullish sign,” Blikre added.
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