Key takeaways
- An estimated $2.4 billion from FTX refunds could re-enter the crypto market.
- The plan could provide a positive boost to the crypto market, but the impact could be limited and gradual.
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K33 analysts estimate that around $2.4 billion could be reinvested into crypto markets following the implementation of FTX’s reorganization plan. This move, coupled with a recent price recovery, supports a bullish outlook for Bitcoin in the fourth quarter.
On Monday, U.S. District Judge John Dorsey confirmed that FTX Estate could move forward with its reorganization plan. The plan will allow the entity to distribute up to $16 billion in recovered assets to FTX creditors.
Under the plan, those with approved claims below $50,000 will receive their reimbursement within 60 days from the effective date. K33 analysts Vetle Lunde and David Zimmerman predict that creditor payments will begin at the end of the fourth quarter of 2024. Larger claims could take until mid-2025 to be fully resolved.
Analysts estimate that $3.9 billion of the total claims were purchased by credit funds, which they say are unlikely to re-enter the crypto market.
Regarding 33% of the remaining claims that belonged to sanctioned countries, insiders, or individuals without KYC verification, they suggest that these groups are unlikely to be able to claim the funds.
Based on these assumptions, analysts reduce the potential amount of funds that could re-enter the crypto markets to around $2.4 billion and the injection could be carried out by the crypto-native and risk-tolerant trader base from FTX. They note, however, that the impact could be gradual and spread over next year, thus limiting its overall effect on the market.
“This will likely unfold in several waves over the next year, meaning its overall impact on the crypto market may be small,” the analysts wrote.
Crypto analyst Marty Party also suggested that many creditors who receive the money will likely reinvest it in crypto assets, which could boost the overall market.
Remember, #FTX will redistribute $16,000,000,000 to its creditors in the fourth quarter of 2024. That’s in 2 weeks.
Most of this liquidity will flow back into crypto. pic.twitter.com/GQi7RhcaH6
– MartyParty (@martypartymusic) September 19, 2024
Refunds will begin soon under FTX’s refund plan. Although the exact date has not yet been determined, the timing will likely coincide with the US presidential election. This period has historically been associated with an increase in financial market volatility.
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