Retail investors' enthusiasm over FTX's court-approved bankruptcy plan may be premature, according to a new note from Presto Labs. In it, the analysts question whether the $16 billion in cash repayments to creditors, as part of the plan, will even flow back into the crypto market.
The United States Bankruptcy Court for the District of Delaware on Monday gave a nod to FTX's Plan of Reorganization nearly two years after the exchange's collapse. Under the plan, 98% of FTX creditors will receive approximately 119% of their allowed claims within 60 days after the effective date, subject to certain requirements.
FTX projects that the total value of property available for distribution will be between $14.7 billion and $16.5 billion. This amount includes assets under the control of various entities, including the Chapter 11 debtors, joint official liquidators of FTX Digital Markets, Ltd. in the Bahamas, Administrators of FTX Australia, the U.S. Department of Justice, and numerous private parties.
"It's premature to assume that creditors will put that cash straight back into the market. Making such a blanket assumption requires at least some analysis of the claimant composition, not something anyone has done publicly as far as we know,” Presto Labs stated.
The research firm points out that repayments are set to begin within 60 days after the plan's "effective" date, which has yet to be determined. This timeline suggests that any potential market impact isn't imminent.
Despite the development, the broader cryptocurrency market showed a slight downturn on Tuesday. During European trading hours, Bitcoin was down 1.9% at $62,300, while Ether traded down 2.2% at $2,425, according to CoinGecko data.
Speaking with Decrypt, Georgy Slavin-Rudakov, CMO at crypto payment ecosystem B2BINPAY said the Bitcoin price taking a dip after touching $64,000 is a healthy correction following a significant rally, which is within normal market behavior. '
“The end of the year is historically positive for crypto prices, as they tend to rise during this period. So the outlook for Q4 remains bullish, I believe it will reach $75,000, driven by broader market optimism and institutional interest,” he said.
Meanwhile, crypto data provider Kaiko stated that while some assets like Solana (SOL), The Open Network (TON), and Tron (TRX) have more than doubled in value since the collapse of FTX, others present significant challenges.
FTX held overwhelming positions in certain tokens, such as 99% of MAPS tokens, 97% of OXY tokens, and 95% of Serum (SRM) tokens. These holdings are particularly problematic to liquidate without causing their prices to collapse, Kaiko stated.
Edited by Stacy Elliott.