Cryptocurrencies

Analysts at K33 Research say the planned cash repayment to FTX’s creditors could create a ripple…

Analysts at K33 Research say the cash payout to FTX’s creditors could trigger a flurry of “buying pressure” in the cryptocurrency market.

FTX is set to pay out at least $14.5 billion in cash to users who lost money due to the exchange’s bankruptcy. These payments are likely to create “upward burden” for the market, K33 analysts Vitel Lund and Anders Heislett said in a May 14 report.

“Not all creditor payments are bearish,” analysts said, comparing FTX’s expected cash repayments to planned cryptocurrency-based repayments from Mt. Gox and Gemini. the latter two combined “are currently worth $10.6 billion.”

Lund and Hislett concluded that buying pressure from cash receivers would offset selling pressure from cash receivers.

Not all creditor premiums are on the decline. Source: K33 research

Noting that it would be “impossible” to determine ahead of time the net buying or selling pressure from these payments, analysts said the timing of the payments could be a key element in predicting their impact on the market.

Related to: Post FTX the cryptocurrency industry needs education before regulation

A $1.7 billion payment to Gemini is scheduled for early June, while an $8.9 billion payment to Mt.Gox is expected by the October 2024 deadline.

Analysts said there was still some uncertainty about the planned repayment date because the court had not yet approved FTX’s repayment proposal, but said most of FTX’s creditors expected the repayments to be made later this year.

“The different timing of these premiums is another indicator of a summer slowdown in the market and a strong finish to the year.”

On May 8, FTX said it could pay up to $16.3 billion to creditors, with those with claims below $50,000 eligible to recover up to 118% using the price of their cryptocurrency in November 2022.

Some industry experts expressed dismay at the proposal, saying not all creditors would receive premiums commensurate with current market rates.

“I understand why the bankruptcy process had to go this way, but let’s not pretend that the victims are getting their money back,” BitGo CEO Mike Belshi wrote in a May 8 post to X.

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