JPMorgan: Payments to Customers of Bankrupt Crypto Exchanges Will Balance Each Other Out
Payments to customers of bankrupt crypto exchanges Mt.Gox and FTX will balance each other out.
JPMorgan analysts believe that the funds creditors of the bankrupt cryptocurrency exchange Mt.Gox will receive in the form of bitcoins may put pressure on the market in July.
Analysts at JPMorgan suggest that the potential drop in the value of the first cryptocurrency due to the sale of bitcoins by Mt.Gox investors will be offset by creditors of another bankrupt cryptocurrency exchange, FTX. Unlike Mt.Gox investors, FTX creditors will receive payments in cash and may reinvest the funds into cryptocurrencies.
Operating from 2010 to 2014, Mt.Gox was the largest crypto exchange in the world, handling more than 70% of all bitcoin trading volume. However, a series of hacker attacks on the exchange led to the loss of 850,000 BTC, which would be worth over $50 billion at today's rate. The bankruptcy of the exchange resulted in a seven-and-a-half-year legal battle before a compensation plan for affected users was developed in 2021.
FTX owes customers about $11 billion, but its new management managed to liquidate the exchange's surviving assets worth $16.3 billion. If the compensation plan is approved by the court, 98% of the exchange's users will be entitled to compensation amounting to 118% of their deposits at the time of its bankruptcy in November 2022.
Mt.Gox Will Distribute $9 Billion in Bitcoins to Client
On June 24, Mt.Gox administrators announced plans to start compensating clients. By the end of 2024, Mt.Gox administrators intend to distribute 142,000 bitcoins (approximately $9 billion at the end of June rate), 143,000 Bitcoin Cash coins (around $53 million), and ¥69 billion.
JPMorgan analysts believe that most of the payments to Mt.Gox investors will be made in July. "Assuming most of the sales by Mt.Gox creditors occur in July, [this] creates a trajectory where cryptocurrency prices will face further declines in July but start to recover in August," the analysts stated.
Unlike Mt.Gox clients, who will receive partial compensation in cryptocurrency, creditors of the bankrupt FTX exchange are expected to receive payments in cash over the next few months.
JPMorgan noted that FTX's cash payouts, estimated at around $14–16 billion, are expected shortly after the final approval of the exchange's liquidation plan on October 7. According to analysts, these FTX payments could support growth as creditors are likely to reinvest the funds into digital assets.
"The problem for cryptocurrency markets is that there is likely a three-month gap between potential sell-offs by Mt.Gox creditors in July and the reinvestment of funds by FTX creditors in October-November," the analysts noted.
