- FTX has announced a plan to repay creditors up to $16.3 billion
- Analysts believe redemptions could balance market dynamics, leading to a bullish second half in 2024
FTX, the crypto exchange that filed for bankruptcy last year, has done so announced a major plan to repay its creditors, which could potentially inject new momentum into the crypto market. On May 8, it was announced that the exchange could repay about 98% of its creditors, which could amount to as much as $16.3 billion.
Those with claim amounts under $50,000 are eligible for a chargeback of up to 118%, based on November 2022 cryptocurrency prices. This move was welcomed by the market, with CEO Ray noting:
“We are pleased to be in a position to propose a Chapter 11 plan that contemplates the return of 100% of bankruptcy claims plus interest for non-government creditors.”
FTX’s repayment plan is expected to have significant ripple effects on the crypto market. This was the subject of K33 Research’s latest report reportwritten by analysts Vetle Lunde and Anders Hesleth.
According to the same, FTX’s cash payouts are likely to create a “bullish overhang” for the market, potentially leading to increased buying pressure.
Analysts weigh in: FTX redemptions versus market dynamics
K33 Research analysts believe that not all refunds to creditors have a bearish impact. According to them, cash-based refunds by FTX will conflict with the crypto-based refunds planned by other entities such as Mount Gox and Gemini, which are valued at a combined $10.6 billion.
They claim that the buying pressure from cash recipients of FTX could neutralize the selling pressure from those receiving crypto payouts. “Not all repayments to creditors are bearish,” they pointed out, suggesting the overall effect could be more balanced than initially expected.
However, the exact influence of these repayments on the market is difficult to predict in advance. Thus, the timing of these payments will be critical in assessing their full impact.
While Gemini’s $1.7 billion repayment is expected in early June and Mount Gox’s $8.9 billion repayment is expected in October 2024, the FTX’s repayment schedule is still under court review, with most creditors making payouts later this years to expect.
“The different timing of these refunds represents another indication of a slow summer in the market and a solid end to the year.”
Market trends and future prospects
Meanwhile, the global crypto market has shown strong bullish signals lately, with Bitcoin and Ethereum breaking major resistance levels. In the last 24 hours alone, the market is up 5.8%, adding over $100 billion to the global crypto market capitalization.
This rebound has led to significant short trading liquidations. During the mentioned period58,875 traders were liquidated, totaling $159.13 million in liquidations. This wave of liquidations follows a recent trend whereby ETH and PEPE contributed to $50 million in short trade losses.
Source: Coinglass
Moreover, the rise in Bitcoin’s open interest, which has risen by almost 10% in the past 24 hours, indicates increasing capital inflows into the market. This is also a sign that investors are increasingly confident in the direction of the market.
Source: Coinglass