Markets
How FTX’s $16 Billion Creditor Cash Payments Could Help Offset Mt. Gox’s Crypto Sale – DL News
- FTX’s bankruptcy estate is expected to pay up to $16 billion in cash to creditors.
- While the timing depends on court approval, this could help offset crypto selling pressure from other collapses.
FTX shelling out as much as US$16 billion in cash payments to creditors could boost cryptocurrency prices later in the year and help offset selling pressures caused by other bankruptcy cases.
This is according to analysts at K33 Research, who suggest that FTX cash payments can balance the risks associated with crypto payments for Mount Gox and Gemini creditors.
“FTX’s cash refund could be seen as excessive upside,” wrote Anders Helseth and Vetle Lunde, head of research and senior analyst, respectively, at K33 Research, in a report this week.
Lunde said DL News which many FTX lenders they spoke to say will buy back the crypto “much more aggressively” than K33’s original assumptions.
While Lunde didn’t offer any value, FTX’s creditors – K33 estimates around 50% – could help offset some of the selling pressure stemming from Mt.
“Many lenders hit by FTX’s bankruptcy are crypto natives who turned to FTX to trade cryptocurrency derivatives and increase exposure,” Lunde said.
These investors are still very much present in the market and are “eager to accumulate more exposure,” in part to recoup losses from the FTX collapse, Lunde added.
While some FTX lenders will likely avoid crypto permanently, crypto natives and funds that regularly trade crypto will likely prefer crypto exposure to holding cash or traditional equity investments, Lunde said.
Join the community to receive our latest stories and updates
All of this reflects some of the recent complications of the FTX saga, which saw the exchange collapse in 2022.
Its founder, Sam Bankman-Friedwas found guilty in seven counts of fraud and conspiracy in 2023 and was recently condemned to 25 years in prison.
Crypto Refunds
So why would crypto refunds have an adverse effect?
At first glance, creditors being reimbursed $9.2 billion in cryptocurrencies for the 2014 Mount Gox collapse seems like a positive development.
Likewise, lenders are waiting to be made whole after the collapse of crypto lender Genesis saw $1.8 billion worth of crypto in Gemini Earn Program to vanish.
Still, the fear is that creditors will immediately sell crypto assets, creating more supply and lowering prices.
Helseth and Lunde suggest that paying cash to FTX’s creditors would offset some of the market pressure because they will have the liquidity they need.
Timing is everything
The timing of reimbursements could also help offset some of the risks, the researchers wrote.
Gemini payments are scheduled for early June, while Mt. Gox payments are due in October.
Meanwhile, FTX plans to pay creditors soon after its reorganization plan gets court approval, potentially by the end of the fourth quarter.
Lunde said: “The market will have to withstand the potential liquidity effects of Monte selling pressure. Gox property long before FTX creditors can reallocate cash capital to the market.”
Crypto Market Movers
- Bitcoin is up 0.1% in the last 24 hours and is trading at $66,261.
- Ethereum rose 1.1% to $3,029.
What are we reading
Sebastian Sinclair is a market correspondent for DL News. Have a tip? Contact Seb at sebastian@dlnews.com.