FTX’s approved repayment plan may potentially boost Bitcoin’s growth in Q4 2024.
About 98% of FTX creditors receive roughly 119% of their claims’ value.
Repayments to influence Bitcoin prices amid U.S. economic and regulatory changes.
The cryptocurrency world is closely watching FTX’s progression through its bankruptcy repayment plan, particularly its potential impact on Bitcoin’s performance in the fourth quarter of 2024. After a complex legal process, a U.S. bankruptcy court has green-lighted FTX’s initiative to begin repaying its creditors, with disbursements starting in December 2024.
FTX Settlement Plan
This phase is crucial as it aligns with the post-U.S. election period, adding economic and regulatory uncertainty to the market. FTX’s settlement plan includes a phased repayment process, focusing first on retail investors and smaller claimants, who might recover full or nearly full value of their claims.
Around 98% of creditors are set to receive about 119% of the value of their claims based on the November 2022 asset valuations, just before FTX’s downfall. This methodical payout is critical for regaining trust in the crypto sector and marks a significant recovery effort following one of the industry’s largest scandals. But, the creditors are still upset over their 10-25% returns from the FTX repayments.
How Will FTX’s Repayment Plan Affect Bitcoin?
The potential inflow of cash into the market from these repayments could create a bullish phase suggesting that recipients may reinvest their recovered funds back into digital assets like Bitcoin. Such an influx could uplift market sentiment and possibly drive prices up, especially since Bitcoin has historically performed well from October through March.
However, the repayment strategy has faced some critiques, particularly from creditors who had hoped for repayments in cryptocurrency to potentially benefit from the significant rise in asset values since FTX’s collapse.
Bitcoin, for example, has escalated from around $16,000 at the time of FTX’s bankruptcy to over $60,000 in October 2024. The decision for cash repayments, despite being substantial, may not fully reflect the current market value of the cryptocurrencies originally held by creditors.
As the repayments begin, the crypto market will also face external factors like U.S. monetary policy and regulatory developments. And, the Federal Reserve’s interest rate decisions along with the outcome of the November elections are expected to have some impact.
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