Will FTX Creditor $12 Billion Payouts Revive the Sluggish Crypto Market?

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As a seasoned crypto investor with a decade-long journey under my belt, I can’t help but feel a glimmer of optimism in these times of market sluggishness. The upcoming FTX creditor payouts could potentially serve as the much-needed spark to reignite the fire in the crypto world.

In the upcoming months, it’s possible that the cryptocurrency market will experience a large financial boost, as FTX creditors are expected to receive approximately $12 billion in returns. This money is set to flow into the market following a court-approved repayment scheme, leading some to wonder if this substantial amount could revive a currently stagnant market.

FTX Creditor Payouts Could Spark Crypto Market Revival

By June, the bankrupt cryptocurrency exchange disclosed they had approximately $12.6 billion to refund customers, potentially rising to $16.5 billion as more assets get sold off. The initial payouts, amounting to around $1.1 billion, may seem modest but are anticipated to significantly bolster the crypto market, particularly Bitcoin.

As a researcher, I’m excited to share that the payout schedule is progressing, and it seems creditors of FTX are poised to reap benefits from this development. Notably, Alex Thorn, Head of Research at Galaxy Digital Holdings, highlighted that these payouts could inject liquidity back into the market. This influx of liquidity could serve as a catalyst, potentially sparking significant price fluctuations in major cryptocurrencies.

Most recently, Judge John Dorsey officially sanctioned the bankruptcy plan, setting a clear timeline for repayment. According to the approved plan, the initial distributions to FTX creditors will commence in December for smaller claims, with larger claims slated for the first half of the next year.

Under this systematic repayment scheme, FTX creditors can anticipate a steady flow of their funds over time, with the entire process potentially lasting up to three years to address all outstanding claims. This phased release of funds is considered a tactical decision aimed at preventing abrupt changes in the market while also limiting the immediate market impact.

Impact on Crypto Volatility and Market Dynamics

This month, there’s been little activity in the cryptocurrency market, as indicated by a 3% drop in value for the top 100 coins. Contrary to expectations, October – traditionally a robust time for digital assets – hasn’t ignited the usual surge this year. Instead, the market has seen significant crypto selloffs during the first week of what was expected to be an Uptober rally.

Nevertheless, potential distributions to FTX’s creditors could shift the current narrative by reinvesting much-needed liquidity into marketplaces facing a shortage of it. In response to this, Benjamin Celermajer, co-chief investment officer at Magnet Capital, expressed his thoughts.

As an analyst, I’m confidently predicting that some funds might return to cryptocurrencies, which could potentially act as a significant price driver for the currently liquidity-deprived market.

Furthermore, research company K33 predicts an “untapped demand from FTX redeployers” to be approximately $2.4 billion. Yet, they also advise that the influence on the cryptocurrency market might be diminished and gradually unfold throughout the next year as payments are dispersed in stages.

Over the next few months, a steady influx of money might not cause instant major shifts, but it could provide a foundation for market values to become more stable and potentially increase.

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2024-10-09 12:40