According to one report According to crypto research firm K33 Research, the price of Bitcoin (BTC) could benefit from the latest developments in the FTX bankruptcy saga.
Payouts to FTX creditors could be bullish for Bitcoin
Analysts at K33 suggest that recent developments in the FTX estate creditor repayment process could help the leading digital asset maintain its bullish price momentum into the fourth quarter of 2024.
Last week, escalating geopolitical tensions in the Middle East and stronger-than-expected US job numbers led to a slight pullback in Bitcoin. The flagship cryptocurrency fell from $65,920 on September 28 to $60,200 on October 3, before recouping some losses over the weekend.
On October 7, Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware approved the settlement long awaited FTX reorganization plan, which aims to initiate refunds to creditors almost two years after the collapse of the Bahamas-based crypto exchange.
Notably, almost 94% of creditors belong to the “dot-com customer rights” class. voted in favor of the reorganization plan. The only major criticism of the plan was Sunil Kavuri – a representative of the largest creditor group of the FTX.
Kavuri called on the estate to pay out digital assets in kind, rather than the corresponding dollar value, when FTX filed for bankruptcy in November 2022.
In the report, K33 analysts Vetle Lunde and David Zimmerman expect payouts to creditors to roll out in the second half of the fourth quarter of 2024 and continue through early first quarter 2025. These payouts will occur within a 60-month period. days after the court’s effective date. The date has not yet been announced, but it is expected to be sometime in mid-November. The report notes:
Debtors have 60 days to repay individual customers with claims of less than $50,000, representing an asset value of approximately $1.2 billion. The larger creditors (entitlement class) are expected to receive their $9 billion payouts in February 2025.
Bulls monitor the funds entering the crypto market
Bitcoin bulls will likely focus on the amount of cashout funds that could potentially re-enter the crypto market. Notably, a significant portion of digital assets have already been converted to fiat, reducing potential estate plan selling pressure.
The analysts say that of the $14.4 billion to $16.3 billion in claims, about 25% – or $3.9 billion – has already been bought by credit funds and is unlikely to re-enter the market.
Furthermore, 33% of the remaining claims belong to a subset of sanctioned countries, insiders and entities without KYC verification. It is unlikely that these assets will be claimed.
After taking these factors into account, 20% to 40% – or roughly $2.4 billion – of the remaining $8 billion could return to the markets, as “FTX’s trading base consisted of crypto-native aggressive risk takers.”
The report further highlights that this capital is likely to enter the markets in multiple waves in 2025, with a relatively moderate impact on the overall crypto market. Bitcoin is trading at $62,793 at the time of writing, down 1.1% in the past 24 hours.
Featured image from Unsplash.com, charts from K33 and TradingView.com