[NEWS] K33 Research predicts that FTX's cash repayments "could cause a surge in cryptocurrency prices"

Digital asset analyst K33 Research published a report on the 14th stating that cash repayments to creditors of the collapsed cryptocurrency exchange FTX in 2022 could cause a surge in cryptocurrency prices.

Their analysts predict that the repayments from FTX could lead to a potential bullish trend in the cryptocurrency market.

K33 analysts Vetle Lunde and Anders Hesleth pointed out in the report that FTX is prepared to distribute at least $14.5 billion in cash to creditors. They analyzed that users who suffered losses when FTX collapsed would exert significant buying pressure on the market. This buying pressure could also offset other negative effects related to cryptocurrencies.

K33 analysts also compare FTX’s cash repayments to the planned crypto-in-kind repayments of other entities such as Mt Gox and Gemini. Creditors are set to receive a combined total of $10.6 billion worth of crypto from the two entities.

The analysts argue that while crypto-based repayments could increase selling pressure as recipients liquidate assets, cash repayments from FTX could have the opposite effect, stimulating demand and stabilizing prices.

The timing of these repayments is crucial in predicting their impact on the market. Gemini is set to start repaying $1.7 billion in early June, while Mt Gox is set to repay $8.9 billion by October.

However, FTX’s repayment schedule is currently unclear with no stated timing and pending court approval. Meanwhile, creditors appear to expect to receive repayments later this year.

Analysts emphasize that staggering the timing of these repayments will help avoid the market downturn seen in the summer and could keep the market active towards the end of the year. Moreover, this staggered approach could potentially help reduce volatility.

Some criticize the repayments

Despite K33 Research's optimistic forecast, some industry players have expressed concerns about FTX's repayment plan.

On the 8th of this month, FTX announced that it would repay up to $16.3 billion. Claimants with relatively small losses are expected to receive more than 100% of their losses based on the price of crypto assets in November 2022.

However, Mike Belshe, CEO of digital asset custody company BitGo, criticized the plan, arguing that it "does not come close to fully compensating all creditors."

"I understand why the bankruptcy proceedings need to proceed this way, but let's not pretend that victims will get their money back," Belcher said, emphasizing the widespread dissatisfaction among some stakeholders.

Reference: Report
Image: Shutterstock

Related articles:

Former FTX CEO Sam Bankman-Fried sentenced to 25 years in prison

FTX gives up on relaunching cryptocurrency exchange service, plans to reimburse customers in full