Market research by brokerage firm K33 suggests that the planned cash repayments to FTX creditors may trigger a surge in bullish “buying pressure” within the cryptocurrency market. The study, released on Wednesday, alleged that cash flow from FTX could neutralize the in-kind reimbursement from firms like MtGox and Gemini.
“While Mt. Gox and Gemini creditor repayments represent a bearish overhang in the market, FTX’s cash repayment may be viewed as a bullish overhang,” K33 stated.
Earlier in May, defunct crypto exchange FTX proposed allocating a minimum of $14.5 billion in cash to users affected by its bankruptcy. While this is to the displeasure of its creditors, analysts at K33 suggest that this influx of funds could lead to positive market sentiment. They noted that anticipated cash reimbursement could counterbalance any adverse effects from alternative repayment methods involving cryptocurrency assets.
A Different Effect
K33 noted that while the creditor repayments from Mt. Gox and Gemini could be seen as a negative factor that will affect market sentiments, FTX’s cash repayment might be perceived as a positive influence.
Gemini announced in February, after a long legal battle with crypto lender Genesis, that the duo had reached an agreement to make Earn users whole. The US-based crypto exchange noted that it would refund $1.8 billion in kind to investors in its Earn program.
Mt. Gox also announced it has started fulfilling its repayment obligations to investors and plans to hand out $8.9 billion to them on or before October 2024. These settlements were widely expected to create selling pressure in the crypto market, but K33 alleges that FTX may bail out the situation.
“Both Mt. Gox and Gemini will reimburse creditors in kind, whereas FTX has sold off assets to pay creditors in cash. On the net, buying pressure from cash recipients may neutralize selling pressure from in-kind repayments,” the crypto brokerage firm asserted.
Timing Is Crucial
However, K33’s postulated neutralization assertion is dependent on the timing of FTX’s repayment, according to the report. The firm insinuated that the crypto market would suffer ups and downs if the FTX’s repayment is wide apart from repayments from Gemini and Mt. Gox.
If the court accepts FTX’s reorganization proposal, the company aims to reimburse creditors within two months. However, there are uncertainties regarding the approval of the plan, which might delay the repayment till the fourth quarter of 2024.
“The different timing of these repayments represent yet another indication of a slow summer in the market and a solid end to the year,” K33 alleged.
Mishael Nwani | July 1, 2024
