Markets
Bullish signal for crypto market recovery?
K33 Research Experts are eyeing an encouraging recovery in the crypto market thanks to upcoming refunds from the failed crypto exchange, FTX, announced on May 14. K33’s Vetle Lunde and Anders Hesleth emphasized FTX’s willingness to distribute a minimum of US$14.5 billion cash to your creditors.
The expected cash injections, intended for users who suffered losses during The collapse of FTX, are about to trigger significant buying activity in the market. This anticipated increase, dubbed “excess bullishness” by experts, could offset any potential negative effects of other repayment strategies involving crypto assets.
Cash vs Crypto: Understanding Market Dynamics
K33 analysts compared FTX’s cash refunds to cryptocurrency refunds planned by other entities such as Mt. Gox and Gemini, totaling $10.6 billion. While cryptocurrency refunds could intensify selling pressures as recipients dump their assets, the influx of cash from FTX could stimulate demand, potentially promoting market stability.
Lunde and Hesleth highlighted the different dynamics introduced by cash payments, suggesting that not all repayments to creditors pose problems for the market.
Timing is the key!
The timing of these refunds appears to be a critical factor in assessing their market implications. Gemini’s $1.7 billion disbursements are scheduled to begin in early June, while Mt. Gox aims to repay $8.9 billion by October 2024. However, FTX’s repayment schedule remains uncertain, pending court approval, although creditors anticipate funding later this year.
Analysts stress that the staggered release of funds could lead to a subdued summer market, followed by robust performance later in the year. This phased approach can facilitate smoother absorption of funds, reducing potential market volatility.
The debate continues…
Despite K33 Research’s optimistic outlook, dissenting voices within the industry raise concerns about FTX’s refund proposal. FTX’s May 8 announcement suggested potential refunds would reach $16.3 billion, with smaller claimants potentially recovering more than 100% of their losses based on November 2022 cryptocurrency prices.
However, the repayment, denominated in US dollars rather than cryptocurrencies, drew criticism for neglecting potential gains, offering a modest 9% interest rate to creditors, considered insufficient compensation.
Obstacles identified!
A Bloomberg Report highlighted discontent among creditors such as Sehgal and Romero, who will receive substantially less than the current value of their assets. Sehgal, a former member of FTX’s creditors committee, expressed frustration, echoing feelings of discontent among affected parties.
BitGo CEO Mike Belshe also weighed in, criticizing the plan for failing to adequately compensate all creditors. Belshe’s statement underscores broader dissatisfaction among stakeholders,
“I understand why the bankruptcy process needs to work this way, but let’s not pretend victims are getting their money back,” he said.
What do you think of the FTX refund plan? Is cash the best approach?
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