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Was the market overreacting when the mentougou case triggered the BTC selling panic?

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Contains the four key information of the draft debt settlement.

Original title: "mentougou case triggers BTC selling panic, is the market overreacting?"

Source: daily planet

On the eve of the annual meeting of Mt. Gox's creditors, a new disclosure document restated a draft of possible repayment in the mentougou case.

According to the draft document of mt.gox clearing and repayment released by shuming kobayashi, the mt.gox exchange will pay legal tender, BTC and BCH to creditors to settle claims, and the creditors of mentougou case can choose whether to accept legal tender or cryptocurrency.

It is important to note that cryptocurrency payouts only support BTC and BCH, and that holdings will be liquidated into cash as much as possible.

As of March 19, 2019, Mt. Gox had a confirmed balance of 69.553 billion yen (about $628 million at the time of publication); In terms of cryptocurrency asset balances, Mt. Gox held 141686.35 BTC, 142846.35 BCH and a certain amount of BSV as of March 18, 2019.

The plan has sparked heated debate in the industry. There are fears that the huge payouts could put huge selling pressure on the market, leading indirectly to a rout. Perhaps the most volatile factor in the short term is what mentougou's creditors do with their money.

Four key information of debt settlement draft

After studying the preliminary draft of the mentougou trustee's settlement to creditors, the Odaily planet came up with four noteworthy points of information:

1. Support "legal currency", "BTC" and "BCH"

In general, the draft discloses two schemes for apportionment of claims. The second is "BTC", "BCH" cryptocurrency payment.

[legal currency cash payment]

· mentougou will pay cash to users who claim legal currency.

Foreign currency-denominated claims will be valued at the exchange rate and remitted internationally through bank accounts. The trustee will pay in yen, us dollar or euro fiat currency as required by the creditor. Remittance fees and foreign exchange fees incurred from foreign exchange shall be borne by creditors. If the creditor does not collect, the money will be deposited with the Japan legal affairs bureau.

· for users of claims BTC and/or BCH, mentougou also allows the claimant to accept cash payments.

According to the exchange rate of BTC and BCH against Japanese yen, the value of cryptographic assets is calculated. However, the trustee may sell all or part of the debtor's BTC/BCH with the permission of the court.

[BTC/BCH cryptocurrency payment]

· the default for not applying for payment in cryptocurrency is to request payment in cash;

· creditors who require BTC/BCH compensation shall apply within a specified date and may only apply once, which cannot be changed later.

· BTC/BCH reimbursement requires the user to register an account with another cryptocurrency exchange and an agreement must be reached with the registered exchange. The exchange ACTS as an agent to receive the creditors' BCH/BTC assets, and the mentogate grantee transfers the money to the exchange in a lump sum.

After the transfer, the trustee will not participate in the terms and rules between the creditor and the designated exchange, and will not assume any responsibility.

& have spent (payment logic of BTC/BCH payment) & NBSP; & have spent

2. The agent of mentougou does not plan to purchase additional BTC and BCH

According to the draft, the holdings of BTC and BCH in mentougou may be insufficient for acceptance. If this happens, the creditors who require the liquidation of BTC/BCH will have some assets liquidated in legal currency.

For example, if a creditor claiming a BTC claim claims 1,000,000 yen and only one BTC cryptocurrency payment is made, the remaining 250,682 yen payment will be made in legal currency.

In the BTC claim example above, the ratio of the claim amount paid in BTC to the total claim amount is about 75%. (1 BTC x BTC exchange rate (749,318.83 yen) ÷1,000,000 yen ≈0.75 yen), if this happens, the trustee plans to apply the same rate (i.e., approximately 75%) to all other BTC claims for payment by BTC.

3. The open position assets other than BTC and BCH will be liquidated into cash as far as possible

According to the draft, mentougou trustees believe that the yen, BTC and BCH will be the main sources of clearing allocations, while cryptocurrencies other than BTC and BCH will be cleared for cash as much as possible.

4. Priority in payment of legal currency claims and small claims

According to the draft, the trustee's policy is to give priority to payment of legal claims and small claims.

· small claims: mentougou trustee plan provides each creditor with a small claim of up to 200,000 yen, which is mainly for users with a low claim amount or less than 200,000 yen.

· if each creditor has both a fiat bond and a BTC/BCH claim, the small claim will be used in priority to pay the fiat bond and, if there is still a balance, the claim for the BTC/BCH claim.

On the whole, the draft liquidation given in the mentougou case is a very conscientious plan.

From the scheme given by the trustee, it is not difficult to see that the attitude of the trustee may be more inclined to creditors to choose legal currency to pay.

On the one hand, cryptocurrencies other than BTC and BCH will also be liquidated into cash, that is, into legal currency to support legal currency claims. On the other hand, it also promises to provide priority payment channels for users who choose legal currency claims. In addition, even if the holdings of BTC and BCH are difficult to be repaid, when the holdings of BTC and BCH are more, they will not use the fiat money to buy new BTC and BCH to repay, but convert the part that cannot be redeemed into fiat money for cash payment.

Of course, whether it is selling off cryptocurrency assets that are not BTC or BCH, or repaying BTC and BCH directly to users, these clearing schemes have indirectly raised new market fears that a fresh sell-off crisis could follow the liquidation of mentoditch.

BTC, BCH, BSV or risk of a meltdown?

In fact, mentougou was stolen assets, has been considered a time bomb.

As mentioned in the previous reading, in the cryptocurrency scheme, the trustee of the channel only recognizes BTC and BCH, and the cryptocurrencies other than BTC and BCH will be liquidated into cash, triggering speculation in the industry that non-btc, BCH assets will be sold off.

In this draft event, the biggest ambiguity comes from how mentougou will liquidate non-btc, BCH funds. Especially the branch currency assets such as BSV and BTG in mentougou account.

According to one estimate posted online, Mt. Gox held nearly 202, 000 BSVS (with a market value of $35 million), which means those BSVS held by Mt. Gox are at risk of being sold or have been sold because BSVS are not included in the option to repay creditors. If the draft is approved, about 135,000 BSVS will be sold or have already been sold by the trustee.

In fact, mentougou faced similar questions in 2018. At the time, Nobuaki Kobayashi, mentougou's trustee, sold 24,600 BTCS and 25,300 BCH.

& have spent (BTC and BCH for sale from march to June 2018) & NBSP; & have spent

An earlier cointelegraph report revealed that Mt. Gox sold tens of millions of dollars worth of bitcoins every week between February and June 2018. Coincidentally, over the same period, the price of bitcoin collapsed, from $10,000 on May 4 to $5,912 by the end of June, a drop of more than 40 percent. The view is that mentougou's liquidation may have indirectly contributed to the bitcoin crash.

But then the trustee, shin-ming kobayashi, focused on that question in a march question-and-answer report on the 10th creditors' meeting.

Kobayashi explained that BTC and BCH were sold between December 2017 and February 2018 and were sold in cooperation with a cryptocurrency exchange based on the market price at the time.

Kobayashi said BTC and BCH were sold after consulting cryptocurrency experts, not as a normal sale on an exchange, but in a way that avoids affecting the market price while making the transaction as secure as possible. The sales methods of BTC and BCH were also approved by the court. The transfer of assets in BTC and BCH addresses does not necessarily mean the sale of BTC and BCH.

Based on previous experience, mentougou trustees who wish to liquidate non-btc and BCH cryptocurrencies are likely to do so in the same way they did in 2018, perhaps by selling them over the counter.

According to Odaily planet, there are currently 137,891 BTC and 137,891 BCH in the mentougou cold wallets tracked by CRYPTOGROUND. It also tracked the movement of data on the chain and found that the most recent transfer between two cold wallets, BTC and BCH, occurred on May 10, 2018.

The data provided by the security company pidun also shows that among the 80 addresses of Mt. Gox exchange it tested, BTC has not changed after January 1, 2019, with a total of 137890.9654843 BTC. In addition, there were 79,956 BTCS on the hacker's account in the addresses of the Mt.Gox attackers it monitored, and there were no changes in the number.

Is the market really overreacting?

Looking back over the past few weeks, the market is still reeling in its search for direction, and it desperately needs a strong event to fuel a bull market that has halved in size.

But in turn, each extreme decline has been more or less associated with selling. For example, every time the fall will be the back of the pot of Plustoken run money transfer assets, such as a period of time ago ten years old miners sold out and so on. These events are reminding investors, wary of the big selling this "time bomb."

Today, the market may still depend on what creditors do with their money.

The token locked up in the mentougou incident is definitely the next bomb. In the view of the panics, the former moguls bought bitcoins at ultra-low cost, and once they got the same amount, they paid a high price. If you no longer trust the cryptocurrency market, the odds are high that it will sell quickly, creating a sell on the market.

In general, creditors are expected to recover 25% of their investment in BTC/BCH and fiat money. In theory, the creditors got 25 cents on the dollar and lost three-quarters of their assets.

Trustnodes said, even so the creditors or have been considerable profits, because since 2014 the COINS are not touched, during the currency price has gone up a lot.

Perhaps we can work out whether the original bitcoin holders in the mentougou have lost money under this undecided scheme.

Mentougou suspended bitcoin withdrawals on Feb. 7, 2014. Bitcoin plunged below $800 that day. But until February 2014, bitcoin's highest price was no more than $1,200, meaning that the cost to the group of bitcoin-holding creditors should be no more than $1,200. On March 25, 2020, the price of bitcoin fluctuated around $6,700. After calculating that, the price of bitcoin increased by at least 458 percent during mentougou's outage.

If a creditor held a bitcoin before the auction stopped, the price was estimated at $1,200, the highest. Once unlocked, a bitcoin should now be converted into 0.25 bitcoins, worth $1,675 at the current price of $6,700.

In other words, in terms of the lowest yield, it is still profitable for creditors to choose to sell when they get their hands on it.

Can foresee is, if this draft is passed formally in the creditor's congress of 25 days, 140,000 BTC, BCH is likely to flow directly to the market, impact current current disk. Odaily said investors should keep a close eye on the mentougou incident and watch out for downside risks such as collective selling.

The deadline for the submission of the Mt. Gox rehabilitation plan is March 31, 2020, which means that the dust will soon be settled on the six-year-old mentougou incident.

What will happen on March 31? It could be that the draft is passed, it could be a new plan to start all over again, or it could be another delay in the submission of a clean-up plan.