FTX repayments could create ‘bullish overhang’ for crypto markets — K33 Research

Slated cash repayments to FTX creditors could create a wave of bullish “buying pressure” in the crypto market, says K33 Research analysts.

FTX is set to pay a minimum of $14.5 billion in cash to users who lost funds in the exchange’s bankruptcy. These payouts would likely create a “bullish overhang” for the market, K33 analysts Vetle Lunde and Anders Hesleth said in a May 14 report.

“Not all creditor repayments are bearish,” said the analysts, contrasting FTX’s expected cash repayments with the planned crypto-based repayments from Mt. Gox and Gemini — the latter two combined “currently valued at $10.6 billion.”

The buying pressure from cash recipients would neutralize the selling pressure from in-kind recipients, Lunde and Hesleth concluded.

Not all creditor repayments are bearish. Source: K33 Research

Noting that it would be “impossible” to determine the net buying or selling pressure from these repayments ahead of time, the analysts said the timing of the payments could form a key element in predicting their impact on the market.

Related: Post-FTX crypto industry needs education before regulation

Gemini’s $1.7 billion in repayments is slated for early June, while Mt. Gox’s $8.9 billion is expected to be repaid by its October 2024 deadline.

The analysts noted that there was still some uncertainty around the scheduled repayment date due to the court not yet approving the FTX repayment proposal, but said that most FTX creditors were expecting repayments to be issued later this year.

“The different timing of these repayments represents yet another indication of a slow summer in the market and a solid end to the year.”

On May 8, FTX said it could repay creditors as much as $16.3 billion with those holding claim amounts below $50,000 being eligible for up to 118% of the recovery — using the price of their crypto in November 2022.

Some industry pundits expressed dissatisfaction with the proposal, saying that not all creditors would be receiving repayments equivalent to current market prices.

“I understand why the bankruptcy process needs to work this way but let’s not pretend victims are getting their money back,” wrote BitGo CEO Mike Belshe in a May 8 post to X.

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