$2.4 billion may re-enter crypto markets following FTX repayment, suggest analysts

Key Takeaways

• Estimated $2.4 billion from FTX repayments could reenter the crypto market.
• The plan could provide a positive boost to the crypto market, but the impact may be limited and gradual.

K33 analysts estimate that around $2.4 billion may be reinvested in crypto markets following the implementation of FTX’s reorganization plan. The move, coupled with a recent price recovery, supports a bullish outlook for Bitcoin in Q4.

On Monday, US District Judge John Dorsey confirmed that the 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’s creditors.

According to the plan, those with approved claims under $50,000 will receive their repayments within 60 days, starting from the effective date. K33 analysts Vetle Lunde and David Zimmerman predict that creditor payouts will begin in late Q4 2024. Larger claims may take until mid-2025 for full resolution.

The analysts estimate that $3.9 billion of the total claims were purchased by credit funds, which they believe are unlikely to reenter the crypto market.

Regarding 33% of the remaining claims which were owned by sanctioned countries, insiders, or individuals without KYC verification, they suggest these groups are likely unable to claim the funds.

Based on the assumptions, the analysts narrow down the potential amount of funds that could re-enter the crypto markets to around $2.4 billion and the injection could be made by the crypto-native, risk-tolerant trader base of FTX. However, they note that the impact may be gradual and spread out over the next year, limiting its overall effect on the market.

“This will likely unfold in multiple waves throughout the next year, meaning its overall impact on the crypto market may be soft,” the analysts wrote.

Crypto analyst Marty Party also suggested that many of the creditors who receive the money will likely reinvest it in crypto assets, which could boost the overall market.

Repayments will start soon under FTX’s repayment plan. While the exact date has not yet been determined, the timeline is likely to coincide with the US presidential election. This period has been historically associated with an increase in financial market volatility.