In a significant development, FTX is preparing to re-distribute a staggering $16 billion in cash to its customers. Crypto researcher MartyParty has predicted that a considerable portion of this cash will flow back into the crypto market, serving as a catalyst for growth towards the end of the year.
Impact On The Crypto Market
The analyst predicts that the distribution of $16 billion by FTX, which is anticipated to begin in two weeks, will have a bullish effect on the cryptocurrency market. He believes that a substantial portion of this liquidity will return to the crypto ecosystem. Moreover, reports suggest that the recipients of this cash are primarily individuals deeply entrenched in the cryptocurrency space. MartyParty strongly believes that these recipients will reinvest the funds into the cryptocurrency market, potentially leading to a bullish market trend.
The FTX bankruptcy estate has outlined a comprehensive compensation plan designed to reimburse customers impacted by the exchange’s collapse. The plan encompasses both small and large claims, with varying payout percentages contingent on the claim size. The Convenience Class, encompassing claims under $50,000, is slated to receive 118% of the nominal value, while larger claims exceeding $50,000 are projected to receive between 127% and 142%.
Subject to the court’s final approval, the funds for this substantial payout will stem from the liquidation of various assets that FTX acquired through the misappropriation of customer funds. These assets include investments in cryptocurrency, technology companies, venture funds, and real estate.
Notably, the sale of shares in the AI startup Anthropic alone generated $500 million for recovery efforts, resulting in a total cash reserve of $6.4 billion by February. The remaining funds are under the control of debtors and liquidators, further enhancing the estate’s capacity to compensate its creditors.
Challenges And Potential Delays
As the FTX distribution draws nearer, market participants are closely examining its potential implications for the cryptocurrency landscape. While some anticipate parallels to Mt. Gox BTC distributions, which negatively impacted BTC prices, the unique circumstances of FTX suggest a different outcome.
Unlike Mt. Gox, where creditors received BTC, FTX creditors will receive dollars, potentially creating buying pressure on cryptocurrency markets. However, several factors could mitigate the positive impact of this distribution. First, potential court delays could further extend the timeline. Some FTX creditors may also express dissatisfaction with the settlement plan, potentially advocating for additional revisions prior to its finalization.
Also, the final settlement amount could be less than $16 billion. Crypto analyst Crypto bond, for instance, believes the figure might be closer to $2 billion. In his reply to MartyParty on X he said “it’s not all 16B that will be redistributed though. I heard closer to 2B.” Finally, additional court expenses or rulings could reduce this number.
