FTX Expected Cash Repayments to Creditors Could Boost Crypto Market, Experts Claim
Summary:
FTX, following bankruptcy, is expected to dispense $14.5 billion in cash repayments to users who incurred losses. The move could in turn generate a wave of bullish "buying pressure" in crypto markets, according to K33 Research analysts. These analysts also suggested that the cash payments could offset selling pressure from in-kind repayments planned by Mt. Gox and Gemini. However, some uncertainty still lingers over the proposed repayment schedule. Critics, meanwhile, raise concerns about the plan not reflecting the current market prices.
Payments due to be made to FTX creditors could potentially generate a surge of positive "buying pressure" in the world of cryptocurrency, according to a recent analysis by K33 Research. FTX is expected to dispense a minimum of $14.5 billion in cash to users who suffered losses following the platform's bankruptcy. This significant outlay could foster a "bullish overhang" in the market, analysts Vetle Lunde and Anders Hesleth suggested in a report dating May 14.
"Not all repayments to creditors have a negative effect," the analysts stated, drawing a comparison with the planned repayments in cryptocurrency from Mt. Gox and Gemini, both of which amount to a current value of $10.6 billion. They added that the buying pressure generated by those receiving cash could offset the selling pressure from recipients being repaid in-kind.
It's worth noting, they added, that it would be virtually impossible to predict the precise net buying or selling pressure these repayments will generate in advance, but that the schedule of these repayments might provide some clues about their likely impact on the market.
Gemini is due to make repayments worth $1.7 billion in early June, with Mt. Gox set to pay $8.9 billion by its October 2024 deadline. However, Lunde and Hesleth also flagged that there is some current uncertainty around the date FTX will start its repayments, as the court still needs to approve the FTX repayment proposal. Despite this uncertainty, they noted that most FTX creditors are in expectation of receiving their repayments later this year.
"The varying timings of repayments points at a quieter summer in the market, with a more robust end to the year," they explained. On May 8, FTX suggested it could repay creditors as much as $16.3 billion, with those holding claim amounts less than $50,000 potentially receiving up to 118% of their losses - based on the price of their cryptocurrency holdings in November 2022.
However, the repayment proposal has not been without controversy, with critics arguing that not all creditors would receive repayments matching current market prices. BitGo CEO Mike Belshe was among those to express dissatisfaction in a May 8 post to X.Magazine, remarking, "I understand why the bankruptcy process needs to operate in this fashion, but don't misrepresent the facts – these victims are not getting their money returned in full.
Published At
5/16/2024 4:35:50 AM
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