The Breakdown - Mt. Gox Unlock FUD Will Soon Finally Come to An End

Episode Date: May 30, 2024

One of the most enduring FUDs in crypto land is the mythic Mt. Gox unlock, where people receive back bitcoin that had been locked for years. Today's Show Brought To You By Ledger - 5% to Bitcoin Developers When You Buy https://shop.ledger.com/pages/bitcoin-hardware-wallet Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Wednesday, May 29th, and today we are talking about Mount Gawks coin movement. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. Well, friends, interesting day. After more than a decade, it looks like the Mount Gawks bankruptcy distribution is finally getting underway. On Monday, Bitcoin held by Mount Gox trustees worth

around $9.6 billion was consolidated into a single wallet. It was the first on-chain movement of funds in over five years. The consolidation would line up with plans to distribute the Mount Gox Bitcoin by the end of October this year. The Mount Gox distribution has been a long process marked with several delays. Most recently, there were plans to distribute the Bitcoin to creditors late last year, which will be able to. ultimately fell through. This time around, it seems like the distribution will actually happen, with the estate trustee stating that they are, quote, preparing to make repayment for the portion of cryptocurrency rehabilitation claims to which cryptocurrency is allocated. As the rehabilitation trustee

is proceeding with the preparation for the above repayments, please wait for a while until the repayments are made. As the coins began moving on chain, markets responded with a 2% drawdown, falling below 68,000. The reason for this, perhaps, is that the Mount Cox distribution has been one of the longest running flood narratives in the industry. Some expect the market to strike struggle to absorb the newly unlocked supply if there is a sizable amount of selling from creditors. QCP Capital, however, thinks the concern is overblown, tweeting, These bouts of supply anxiety are likely to be blips in a broader trend higher into the end of the year. Former Mount Cox CEO Mark Carpels also commented on the movement of funds, tweeting,

as far as I know, everything is fine with Mount Cox. The trustee is moving coins to a different wallet in preparation of the distribution that will likely happen this year. There is no imminent sale of Bitcoin's happening. Creditors had the option to receive Bitcoin or Bitcoin cash directly from the estate or convert their holdings into fiat currency. It's unclear what the split is, but it's difficult to imagine that many creditors elected to convert into fiat. Mount Cox bankruptcy claims have been bought and sold since 2014, with a number of large firms in the space accumulating significant positions in private funds. As one example, the Galaxy Digital Mount Gawks Fund was last marked at $83 million, roughly doubling in value

since it was established. Galaxy head of research, Alex Thorne, ran the numbers and estimates that the average creditor will receive around $200,000 worth of Bitcoin. By his calculations, around 1.3 billion worth of Mount Gawks' claims are held by funds. He suggested that the next step will be transfers to distribution agents, including BitGo, Cracken, and BitStamp. Thorne believes that, quote, distribution to creditors is imminent, possibly as soon as the next few days or weeks. However, subsequent comments from the trustee may have pushed that expected timeline back a little. Overall, Thorne said, I anticipate most Bitcoin will be held, but the same may not be true for Bitcoin cash. Next up today, the Michael Saylor playbook is seeing renewed adoption with another

public company announcing their Bitcoin treasury strategy. Medical device manufacturer Semler Scientific have announced they will be adopting Bitcoin as their primary treasury asset. The firm also disclosed the purchase of 581 Bitcoin worth around $40 million. The stock was up 25% on Tuesday following the news. Chairman Eric Semler said in a statement, Bitcoin is now a major asset class with more than $1 trillion of market value. We believe it has unique characteristics as a scarce and finite asset that can serve as a reasonable inflation hedge in safe haven amid global instability. We also believe its digital, architectural resilience makes it preferable to gold, which has a market value of approximately 10 times that of Bitcoin.

A press release from Semler said that after evaluating the options, the board decided that holding Bitcoin would be the, quote, best use of our excess cash. Perhaps the most interesting part of the story is that Semler Scientific is an extremely normal low-cap company rather than a high-flying tech firm. Their market cap is still slightly less than $200 million. The firm held around $62 million of cash and cash equivalence on its balance sheet at the end of last quarter, and has an operating cash flow of around $6 million quarterly. This is exactly the kind of boring but profitable company that Sailor's Bitcoin strategy was made for.

The company said it plans to continue generating revenues and allocating cash reserves to Bitcoin on an ongoing basis. Interestingly, over the last month, we've seen renewed enthusiasm for Bitcoin as a treasury asset. New accounting standards adopted this year have allowed corporate Bitcoin holders to mark up their financials, making the balance sheet strategy much more enticing. At the beginning of May, Block announced they would be investing 10% of its gross profit from Bitcoin-related profits each month.

Later in the month, Japanese investment firm Metaplan had announced that it had a adopted Bitcoin as a balance sheet asset as well. The billion-dollar company started relatively small, purchasing around $7.2 million worth of Bitcoin, and the firm disclosed an additional $1.6 million Bitcoin purchase on Tuesday. While the steps so far have been modest, Metaplanet is aiming to be viewed as the Asian micro-strategy, stating that they will use, quote, the entire range of capital market instruments to strategically bolster its Bitcoin reserves. The initial Bitcoin purchase sent the stock soaring, doubling within the first week. Somewhat related, BlackRock has disclosed the addition of Bitcoin to a pair of income and bond funds.

The BlackRock Strategic Income Opportunities Fund, and the BlackRock Strategic Global Bond Fund have added shares of the Ibit Bitcoin ETF. The income fund now holds $3.6 million worth of Bitcoin ETFs, while the Global Bond Fund holds $486,000 worth. Both of these allocations are tiny, each less than a hundredth of a percent of the fund's overall asset value. The more important, then, is the legitimacy these additions lend to Bitcoin. Both of these funds seek to replicate a globally diversified allocation

to a particular investment or strategy, which of course means that Black Rock is now implying that Bitcoin fits into this global tapestry of assets. Bitcoin author Timothy Peterson noted how categorically different this allocation is to most Bitcoin buys, tweeting, snowballs get bigger as they roll downhill. This is an income fund, not growth, not tech, income. That word has special meaning in the industry, and it is specifically associated with conservative strategies, including those meant for retirement. Hello, Breakers. Today's episode is sponsored by Ledger. As another cycle ramps up, it's another chance to think about your Bitcoin custody best practices,

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to Ledger for supporting the breakdown. Overall, Crypto funds had a quietly strong week last week. Coin shares reported just over a billion dollars in global inflows. Inflows have been positive for three weeks straight, with last week being the strongest since mid-March. Crypto funds have now officially had their best year ever in terms of inflows, racking up 14.9 billion in fresh funds. U.S.-based Bitcoin ETFs are still the majority driver of the numbers, recording a little more than $1 billion worth of inflows for the week. We've also now had two straight weeks without a day of net outflows across the product range. Grayscale outflows seem to have essentially dissipated with only $8.2 million withdrawn from the funds over that period. Monday's GBTC outflows,

however, hit $105 million, dwarfing anything from recent trading days. BlackRock's ETF has now overtaken GBTC as the world's largest Bitcoin ETF with almost $20 billion in net asset value. In other words, it took BlackRock just 95 trading days to accumulate 288,671 Bitcoin. Looking globally, both Switzerland and Germany-based funds had a strong week, with 47 million and 30 million worth of inflows respectively. The newly launched Hong Kong-based funds are struggling a little, however. The products saw a further 28 million worth of net outflows for the week, compounding to an 80 million outflow for the month.

Ethereum products took in 36 million worth of inflows in response to ETF approval news, their largest inflow since March. Trading volumes for crypto funds are up dramatically as well, increasing by 28% week over week. CoinShare's head of research, James Butterfield, wrote that the strong inflows suggests that, quote, sentiment is turning broadly positive despite the recent price rises. This is likely due to investors interpreting the FOMC Minutes and recent macro data as mildly dovish. Following up on some of the political news that we've been tracking, the court has dismissed the SEC case against debt box and ordered the agency to pay $1.75 million in fees. You might remember this disgraceful lawsuit involved SEC lawyers presenting misleading evidence to the court

to obtain an intervention order against debt box. The order was then used to freeze business and personal bank accounts related to the project, throwing the founders' lives into turmoil and the company into receivership. On review, the judge called the SEC's conduct a, quote, gross abuse of power and sanctioned the agency. In addition to granting $1.75 million in legal and receivership fees, the case has been dismissed without prejudice. This means the SEC is at liberty to refile the lawsuit at a later date. Overall, almost the entire list of fees submitted to the court was accepted as appropriate, save for one random item worth $649. We also got another poll about crypto as an election issue. New polling funded by Grayscale and conducted by the Harris poll shows that one-third of voters

will consider crypto policy when making their voting decision. The online survey polled 1,700 voters from across the country. 77% of respondents said that a presidential candidate should have at least an informed perspective on crypto, and interestingly, respondents were evenly split on which political party is leading on crypto issues. When combined with the same polling conducted late last year, the survey suggests that crypto enthusiasm is growing among voters. Last year, the poll found that 40% of voters believe they would eventually have crypto in their investment portfolio, and that figure is now at 47%, making the policies surrounding the industry increasingly relevant.

Zach Pandy, Grayscale's head of research, said, likely American voters from across the political spectrum indicate a heightened interest in investing in crypto assets and in supporting candidates well-versed in the emerging technology. In addition to political questions, the survey found that almost everyone had heard of Bitcoin with just 2% responding that they hadn't. Around half said they had heard of Ethereum. Around 17% of voters said that they had invested in Bitcoin, which makes this another piece of data confirming the often cited statistic that around 20% of Americans own crypto. That 17% mark means that Bitcoin was roughly as popular as bonds within this cohort and more popular than ETFs. 44% of voters believe to some degree that, quote,

crypto and blockchain technology are the future of finance, which is a 4% point increase from responses to last year's gray scale survey. Finally, 52% of respondents said they would be more likely to invest in digital assets if the industry gets more regulation. So friends, compared to the bombs of last week, obviously we were in a slightly quieter period, to which I say thank goodness, obviously we need a chance to catch our breath, but still lots of things quietly moving. And of course, I'll be watching to see if there are any interesting announcements down here at Consensus. For now, though, that is going to do it for today's breakdown. Big thank you to my sponsor for today's show. Check out the Ledger Bitcoin Orange Nano.

5% of sales will go to support Bitcoin Development. Until next time, be safe and take care of each other. Peace.