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Weekly Stories - 5/31

Weekly Top Stories 05-31-24 - Galaxy Research

This week in the newsletter we write about the recent movements from Mt. Gox wallets, PayPal’s PYUSD expanding to Solana, and Mastercard launching a Crypto Credential feature to facilitate P2P crypto transfers.

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Mt. Gox Payouts on the Horizon

On Tuesday May 27, Mt. Gox transferred BTC from their cold wallets for the first time in over 5 years. The bankrupt Tokyo based Bitcoin exchange transferred the full 141,868 BTC balance (~$9.7bn) to a new 1Jbez…APs6 address, which has now been emptied and split equally to 3 other addresses managed by the Mt. Gox Rehabilitation Trustee.

Following the movement of assets, the Mt Gox trustee released the following statement; "The Rehabilitation Trustee is currently managing bitcoin and bitcoin cash in a secure manner. As the Rehabilitation Trustee is proceeding with the preparation for the above repayments, please wait for a while until the repayments are made." The statement suggests that the repayments to creditors will be the next step in the Mt. Gox bankruptcy process. Notably, the Trustee did not elaborate on the timeline for repayment distributions.


Mt. Gox declared bankruptcy in February 2014 in Japan after losing almost 950k BTC in a series of hacks. Over the subsequent 10 years, approximately 15% of the lost customer BTC was recovered, which equates to 141,768 BTC (worth ~$9.7bn at the current BTC price). The Mt. Gox bankruptcy trustee in Japan anticipates to deliver the recovered BTC to roughly 20k creditors.

The Mt. Gox bankruptcy process presented creditors with three options:

  1. Receive an approximately 90% payout now.

  2. Wait potentially 3-5 more years to receive the full amount.

  3. Receive their payout in cash without a haircut but with an unknown further delay.

Galaxy Research estimated that 75% of the recovered BTC elected to receive the early payout in-kind with a haircut. Below is a breakdown of the Mt. Gox BTC balances throughout the bankruptcy process, based on bankruptcy filings, conversations with creditors, and our own estimates and assumptions:

Estimated Mt. Gox Distributions

With the long-awaited payments to creditors from the Mt. Gox bankruptcy finally now on the horizon, the broader crypto market is speculating on what percentage of the distributed coins will be sold upon payment and how this sell pressure will impact BTC and BCH prices. Despite the market's limited understanding of the complexities involved in the Japanese bankruptcy process, initial reactions to the recent Mt. Gox developments seem to overestimate the volume of sell pressure from creditors.

While the market may be expecting 142k BTC to hit the market sometime this year, Galaxy Research expects the amount will be significantly smaller, with 65k BTC set to be delivered to individual creditors and another 30k BTC to be delivered to claims funds and a separate bankruptcy. Additionally, it's reasonable to assume that most of the BTC received by funds that acquired claims from creditors will be distributed to LPs in kind and not sold off. As a result, the initial selling pressure may come from individual creditors (65k BTC).

Although 65k BTC of potential sell pressure is significant, Alex Thorn, Head of Firmwide Research at Galaxy, highlighted in a private research note that the 20k creditors apart of the 65k BTC pool are early adopters of Bitcoin who historically HODL bitcoin (11% of BTC supply has not moved in over 5yrs). Presumably, a large majority of the 20k creditors who purchased BTC at or below $451 are more ideologically pro-Bitcoin than the broader holder base today. These early bitcoin advocates resisted compelling and aggressive offers from claim buyers over 10 years throughout multiple bear markets, suggesting that these early bitcoin adopters want their coins back. Additionally, capital gains tax consequences could further deter any sales as creditors are up a minimum 1,400% on their investments in dollar terms. The bankruptcy trustee has until Oct. 31 to make initial distributions, and while these onchain movements seem to signal repayments could happen soon, it’s unclear whether payments are imminent. Nearly 10 years after insolvency, though, creditors are finally getting close to getting some of their coins back. - Gabe Parker, Alex Thorn

PayPal’s PYUSD launches on Solana

PayPal's PYUSD stablecoin expands to Solana. At Consensus 2024, PayPal announced that the PayPal USD (PYUSD) stablecoin is now available on Solana, becoming the second blockchain that the Paxos-issued stablecoin has launched on after Ethereum. According to a PayPal press release, Solana was chosen for "its proven cost-effectiveness and high throughput". PayPal noted that it is the most used blockchain for stablecoin transfers (according to Artemis data), adding that "Solana has emerged as the leading blockchain to run tokenized transactions and is ideal for PYUSD as it continues to be used for payment use cases."

In addition, PayPal notes in a longer form blog post that other factors contributed to Solana being chosen for the PYUSD expansion, namely Solana token extensions, which bring "familiar fintech features" to stablecoin payments including confidential transfers, transfer hooks (mirroring plug-ins for commercial payments), and memo fields for more user-friendly record keeping.

For users, PYUSD will be shown as a unified balance on PayPal and Venmo wallets regardless of the blockchain. In addition to the PayPal and Venmo wallets, interested parties can buy PYUSD on Solana through, Phantom wallet and Paxos.


After introducing PYUSD to over 100m PayPal and Venmo users in the US, PayPal's expansion to Solana now dramatically improves the usability of PYUSD for payments and commerce use cases. As highlighted in our Crypto Use Cases presentation, Solana Pay enables users to pay merchants in USDC with near-instant confirmations with minimal fees both in-person at point of sale or through online checkout (Solana transactions are typically confirmed in ~0.5 seconds with avg network fees of ~$0.0005). However, the expansion of PYUSD to Solana was always expected - in December 2023, Paxos (the NYDFS-regulated issuer of PYUSD) had received regulatory approval to expand to Solana after being previously limited to just Ethereum.

The more interesting part of the announcement is the other features made possible by Solana token extensions, which enable enhanced programmability. As examples: (i) confidential transfers offer the ability for merchants to keep transaction amounts private (e.g., to not share sensitive sales data), which can attract more merchants to transition businesses to become fully onchain, (ii) transfer hooks can offer the ability to approve or deny a transfer based on compliance or authorization checks, among many other features, and (iii) memo fields provide an important social factor that can be key to the growth and adoption of P2P crypto transfers (as proven by the explosive growth and popularity of Venmo when it first launched). Combining this added utility with the fintech approach of simplifying and abstracting complexities away from users, PayPal and Solana will play an important role in unlocking frictionless payments to onboard the masses. - Charles Yu

Mastercard Brings Credentials to Crypto

Mastercard Crypto Credential launches to facilitate P2P crypto transfers. Also at Consensus, Mastercard announced that its Crypto Credential network went live for cross-border and domestic transfers. Instead of relying on long and complex blockchain addresses, users of the product can send and receive crypto using Mastercard Crypto Credential aliases in a simplified manner. Mastercard Crypto Credential verifies on-chain interactions between consumers and businesses to deliver greater trust and protections to blockchain users. The product also supports the exchange of information to meet the Travel Rule requirement, which aims to detect and investigate money laundering and other financial crimes.

Wednesday's announcement showcased the first real-world application of the Mastercard Crypto Credential system, which was introduced at Consensus the prior year. Aside from the P2P transactions that are live today, other potential use cases may extend to NFTs, ticketing, and other solutions depending on market and compliance requirements. Mastercard Crypto Credial system is currently available for users across several exchanges in Europe and LatAm including Argentina, Brazil, France, Guatemala, Mexico, Portugal, Spain, Switzerland and others. Rollout of the service is limited on a first-come, first-serve basis, but wider availability will roll out in the coming months to more than 7m+ users at participating exchanges, which includes Bit2Me, Lirium and Mercado Bitcoin.


Similar to PayPal, Mastercard's solution offers important abstraction benefits to make crypto transfers much easier and faster. And with its trusted brand, users can feel more comfortable when sending crypto to others. However, the use of readable aliases in place of the long string of letters and numbers that form crypto wallet addresses is not a new concept - many projects have aimed to tackle the issue of long, complex crypto addresses (e.g., Ethereum Name Service with customizable ENS domains). However, Mastercard’s solution is compliance-focused and brings a common set of verification standards for partnered exchanges to follow when conducting the KYC processes to verify users. Mastercard's platform verifies that the both the sender and receiver are valid, and that the receiving wallet of a transaction supports the specific crypto asset and network selected by the sender (otherwise, the sender is notified, and the transaction does not proceed).

If it wasn't clear already, it should be clear now that the financial incumbents are looking to get involved in the development of crypto, which is both a sign of growing adoption but also may raise some centralization concerns. In this case, though, the applications of the Mastercard Crypto Credential solution are currently limited to transfers between partnered centralized exchanges and does not address the more compelling crypto use cases in identity/verification using web3-based credentials, which leaves room for crypto-native projects, like Ethereum Name Service, to grow. - Charles Yu

Charts of the Week

The daily amount of Ethereum execution layer (Layer 1) blob fees paid has reached its highest point since the blobscription mania of late March/ early April. The three-day period ending May 30, 2024 saw 81.1 ETH in fees paid, the fourth highest amount for the window excluding the first three days of blobs on Ethereum. The spike in fees paid is attributable to Taiko, a recently launched based rollup on Ethereum, which started posting blobs on March 27, 2024. Of the 81.1 ETH of execution layer blob fees paid, 54.29 (66.94%) were paid by Taiko.

Ethereum Execution Layer Blob Fees (Denominated in ETH) - Chart

The spike pushed the cumulative dollar value of execution layer blob fees paid over $2.75 million ($2.58 million in base fees and $178,000 in priority fees). To learn more about blobs check out our past newsletter on the topic, and our Dune dashboard for blob related data.

Ethereum Execution Layer Blob Fees by Type - Chart

Other News

  • Pudgy Penguins to release mobile game in 2025

  • SEC's Hester Peirce proposes US-UK crypto regulatory 'cross-border' sandbox

  • Galxe to release alpha mainnet of Layer 1

  • Two BlackRock funds added the firm's IBIT spot bitcoin ETF to portfolio in Q1

  • Ethereum Name Service proposes migration to Layer 2

  • Solana validators to receive full priority fees as SIMD-0096 proposal gains approval

  • Ethereum targets Q1 2025 for Pectra upgrade rollout, following Dencun