FTX Repayments Could Spark Crypto Market Surge, Says K33 Research
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Analysts at K33 Research have predicted a potential bullish trend in the crypto market linked to the bankrupt crypto exchange’s upcoming repayments from FTX. K33 analysts Vetle Lunde and Anders Hesleth highlighted in a report on May 14 that FTX is prepared to distribute a minimum of $14.5 billion in cash to its creditors.
These cash payouts, intended for users who lost money during FTX’s collapse, are expected to exert significant buying pressure in the market. Moreover, this predicted “bullish overhang” could offset any negative impact from other repayment schemes involving crypto assets.
Comparative Analysis: FTX vs. Mt. Gox and Gemini
The K33 analysts have also compared FTX’s cash repayments with the in-kind crypto repayments planned by other entities, such as Mt. Gox and Gemini. Creditors are due a combined value of $10.6 billion in cryptocurrency from these two entities.
The analysts argue that while crypto-based repayments might increase selling pressure as recipients liquidate their assets, the cash distributions from FTX could have the opposite effect, driving demand and potentially stabilizing prices. Lunde and Hesleth emphasized that not all creditor repayments are bearish, highlighting the unique market dynamics introduced by cash payouts.
Timing and Market Predictions
The timing of these repayments is crucial in predicting their market impact. Gemini is scheduled to begin its repayments of $1.7 billion in early June, while Mt. Gox is expected to repay $8.9 billion by October 2024. However, the repayment schedule for FTX is still uncertain and awaits court approval. Nevertheless, creditors expect to receive funds later this year.
The analysts highlight that the staggered timing of these repayments could lead to a slow summer in the market, followed by strong performance towards the end of the year. This staggered approach might help the market absorb the inflow of funds more smoothly, alleviating potential volatility.
Controversies and Creditor Reactions
Despite the optimistic outlook presented by K33 Research, some industry insiders have expressed concerns over FTX’s repayment proposal. On May 8, FTX announced potential repayments of up to $16.3 billion, with smaller claimants eligible for recoveries exceeding 100% of their losses based on November 2022 crypto prices.
However, BitGo CEO Mike Belshe criticized the plan, arguing that it falls short of adequately compensating all creditors.
Belshe remarked, “I understand why the bankruptcy process needs to work this way, but let’s not pretend victims are getting their money back,” reflecting a broader sentiment of dissatisfaction among some stakeholders.
