As a researcher with over a decade of experience in the dynamic world of cryptocurrencies, I find the latest developments surrounding FTX and Bitcoin particularly intriguing. The potential for creditor payouts to boost Bitcoin price momentum in Q4 2024 is an interesting perspective that warrants further exploration.
Based on findings from K33 Research’s recent report, it appears that the ongoing FTX bankruptcy case may potentially boost the value of Bitcoin (BTC).
FTX Creditor Payouts Could Be Bullish For Bitcoin
According to experts at K33, positive changes in the way FTX’s debt is being paid off might boost the value of the top digital asset, potentially continuing its upward trend in the last quarter of 2024.
Recently, intensifying geopolitical conflicts in the Middle East and surprising job growth figures in the U.S. triggered a minor retreat in Bitcoin prices last week. The primary digital currency dipped from $65,920 on September 28 to $60,200 on October 3; however, it partially recovered some losses during the weekend.
As a crypto investor, I’m thrilled to share that on October 7, Judge John Dorsey in the US Bankruptcy Court for the District of Delaware, approved the long-awaited FTX reorganization plan. This significant step aims to kickstart the repayment process for creditors, which has been overdue by nearly two years since the downfall of the Bahamas-based crypto exchange.
It’s worth mentioning that about 94% of creditors within the “dotcom customer entitlement claims” category supported the reorganization plan. However, the plan faced significant opposition from one key figure: Sunil Kavuri, who represents the largest FTX creditor group and was the main critic of the proposed plan.
Instead of converting the digital assets into dollars during FTX’s bankruptcy filing in November 2022, Kavuri advocated that the estate should distribute these digital assets directly.
According to K33 analysts Vetle Lunde and David Zimmerman, it’s anticipated that creditor repayments will initiate towards the end of Q4 2024, lasting into early Q1 2025. These payments are scheduled to take place within two months (60 days) from the court-decided effective date, which is projected to happen around mid-November, though the exact date remains undisclosed. The report underscores this timeline.
Smaller debtors will be given a 60-day grace period to settle debts from customers with claims below $50,000, which add up to around $1.2 billion of assets. Larger creditors (belonging to the entitlement class) are projected to receive their $9 billion payouts in February 2025.
Bulls Monitor The Funds Entering Crypto Market
Bitcoin optimists are more likely to emphasize the possible influx of investment funds returning to the cryptocurrency market. It’s worth noting that a significant portion of these digital assets has already been exchanged for traditional currency, thereby lessening the potential selling pressure stemming from estate plans.
Analysts estimate that out of a potential $14.4 billion to $16.3 billion worth of claims, about 25%, equivalent to around $3.9 billion, has already been acquired by credit funds. It’s expected that this amount won’t be resold back into the market.
Furthermore, about one-third of the remaining cases pertain to a specific group consisting of countries under sanctions, internal parties, and entities without Know Your Customer (KYC) confirmation. It’s improbable that these holdings will be retrieved.
Considering these elements, it’s estimated that between 20% and 40%, which amounts to approximately $2.4 billion, of the leftover $8 billion might be re-entered into the markets. This is due to the fact that FTX’s trading community was composed primarily of crypto-savvy risk-takers who are known for taking aggressive positions.
The report underscores that this capital is expected to make its market entry in several phases across 2025, with a somewhat modest effect on the entire cryptocurrency sector. Currently, Bitcoin is trading at $62,793, representing a decrease of 1.1% over the past day.
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2024-10-09 14:42