Important points
- An estimated $2.4 billion from FTX's repayments could re-enter the crypto market.
- While this plan could provide a positive boost to the cryptocurrency market, its impact may be limited and gradual.
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K33 analysts estimate that approximately $2.4 billion could be reinvested into the crypto market after the implementation of FTX's restructuring plan. This move, coupled with the recent price recovery, supports Bitcoin's bullish outlook for the fourth quarter.
On Monday, U.S. District Judge John Dorsey allowed the FTX Foundation to move forward with its restructuring plan. The plan would allow the company to distribute up to $16 billion of recovered assets to FTX's creditors.
According to the plan, those with approved claims of less than $50,000 will receive repayments within 60 days of the effective date. K33 analysts Vetru Runde and David Zimmerman expect payments to creditors to begin late in the fourth quarter of 2024. For large claims, full resolution could take until mid-2025.
Analysts estimate that $3.9 billion of the total insurance proceeds were purchased by credit funds, and believe it is unlikely that credit funds will re-enter the crypto market.
33% of the remaining claims are owned by sanctioned countries, insiders, or individuals without KYC verification, suggesting these entities are unlikely to be able to claim the funds.
Based on this assumption, analysts have narrowed down the potential amount of capital that could re-enter the crypto market to approximately $2.4 billion, with the injection expected to be based on FTX's crypto-native and risk-tolerant trader base. It is said that this may be done by. However, they note that the impact may be gradual and spread over next year, limiting the overall impact on the market.
“This is likely to unfold in multiple waves throughout next year, meaning the overall impact on crypto markets may be weak,” the analysts wrote.
Cryptocurrency analyst Marty Partey also suggested that many of the creditors who received the funds are likely to reinvest the funds into crypto assets, potentially boosting the overall market.
Remember, #FTX will redistribute $16 billion to creditors in the fourth quarter of 2024. That's in two weeks.
Most of that liquidity will return to cryptocurrencies. pic.twitter.com/GQi7RhcaH6
— Marty Party (@martypartymusic) September 19, 2024
Repayments will begin soon under FTX's repayment plan. The exact date has not yet been determined, but the schedule is likely to coincide with the US presidential election. This period has historically been associated with increased volatility in financial markets.
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