FTX repayments might cause crypto buying pressure: K33

A Tuesday report from the digital asset brokerage firm K33 suggests that repayments from the collapsed crypto exchange FTX might have bullish effects on the crypto market. 

"While Mt. Gox and Gemini creditor repayments represent a bearish overhang in the market, FTX’s cash repayment may be viewed as a bullish overhang," K33 wrote in the report. 

"Both Mt. Gox and Gemini will reimburse creditors in-kind, whereas FTX has sold off assets to pay creditors in cash," K33 continued. "On net, buying pressure from cash recipients may neutralize selling pressure from in-kind repayments." In-kind repayments entail repaying debt with a good or service instead of cash, and buying pressure describes the market demand for a crypto asset. 

FTX owed its top 50 creditors around $3.1 billion, with about $9 billion in liabilities, after its collapse in November 2022, The Block previously reported. The FTX estate has since sold various assets under its ownership, such as portions of its total $7.5 billion in locked Solana and $1 billion in Grayscale shares after the fund converted to a spot bitcoin exchange-traded fund. 

Repayment timing

While noting that the cash repayments may balance out the in-kind repayments, K33 notes that the timing of the repayments may still affect the crypto market. Gemini's repayment, valued at $1.7 billion, is anticipated for early June, with Mt. Gox's $8.9 billion valued repayment expected by its October 2024 deadline. 

"If the court approves FTX’s reorganization plan, FTX intends to reimburse creditors within two months. Uncertainty lingers on when or if the plan will be approved, with recipients preparing for repayments in late Q4 2024," K33 wrote. "The different timing of these repayments represent yet another indication of a slow summer in the market and a solid end to the year.”

In its most recent reorganization proposal, FTX revealed that it held up to $16.3 billion for creditor repayments. The firm also plans to repay creditors with claims under $50,000 compensation of 118%, The Block previously reported.