FTX Creditor Payouts: A Boon for Bitcoin?
In a significant analysis by the crypto research firm K33 Research, the potential impact of the FTX bankruptcy proceedings on Bitcoin (BTC) prices has been highlighted. The developments in the FTX estate creditor repayment process are speculated to prop up Bitcoin’s bullish price trajectory as we approach the final quarter of 2024.
Last week, Bitcoin experienced a modest downturn due to rising geopolitical tensions in the Middle East and unexpectedly robust US employment figures. From a high of $65,920 on September 28, Bitcoin’s value dipped to $60,200 by October 3, before recuperating somewhat over the subsequent weekend.
The FTX reorganization plan, long awaited by stakeholders, received the green light from Judge John Dorsey of the US Bankruptcy Court for the District of Delaware on October 7. This plan aims to commence creditor reimbursements nearly two years after the abrupt downfall of the Bahamas-based cryptocurrency exchange.
Impressively, about 94% of creditors classified under the “dotcom customer entitlement claims” category endorsed the reorganization strategy. However, Sunil Kavuri, representing the largest creditor group, voiced opposition, advocating for payouts in digital assets rather than their dollar equivalents as of the bankruptcy filing in November 2022.
K33 analysts Vetle Lunde and David Zimmerman forecast that creditor repayments will begin in the latter part of Q4 2024, extending into early Q1 2025. These repayments are set to occur within a 60-day window following the court’s effective date, anticipated to be around mid-November. The report highlights:
Debtors will have a 60-day period to settle claims under $50,000 per individual customer, equating to approximately $1.2 billion in assets. Larger creditors are slated to receive $9 billion in February 2025.
Evaluating the Influx of Funds into the Crypto Market
For Bitcoin enthusiasts, the focal point will be the volume of funds from creditor payouts that might re-enter the cryptocurrency space. A significant portion of digital assets has already been converted into fiat currency, thus easing the potential sell-side pressure associated with the estate plan.
The analysis by K33 suggests that of the $14.4 billion to $16.3 billion in claims, about 25%—or $3.9 billion—has been acquired by credit funds and is unlikely to re-circulate back into the market. Moreover, 33% of the remaining claims are tied to entities from sanctioned nations, insiders, and those lacking KYC verification, which might remain unclaimed.
Considering these elements, it is anticipated that 20% to 40%—or roughly $2.4 billion—of the remaining $8 billion could re-enter the markets. This is because FTX’s clientele largely comprised crypto-native individuals known for aggressive risk-taking behavior.
The report further elaborates that this capital influx is expected to occur in several waves throughout 2025, thereby exerting a relatively subdued impact on the broader cryptocurrency market. Bitcoin is currently trading at $62,793, marking a 1.1% decline over the past 24 hours.
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