Optimistic Outlook for Crypto Market as Mt. Gox and FTX Repayments Loom

The upcoming distribution of bitcoin repayments to creditors of the defunct crypto exchange Mt. Gox is set to begin next month. While initial sales may exert some pressure on the market, analysts from JPMorgan foresee a recovery starting in August.

In a recent report, JPMorgan analysts, led by Nikolaos Panigirtzoglou, observed that creditors of Gemini Earn likely liquidated a portion of their crypto assets received, contributing to recent market movements. The analysts pointed to a similar scenario with Mt. Gox creditors in July.

Gemini Earn creditors received $2.18 billion in digital assets, 97% on May 29 and the remaining 3% on June 20. Given the significant increase in bitcoin prices since the suspension of these assets in November 2022, many retail customers likely took profits, impacting the market.

The analysts noted that retail customers, not institutional investors, have been the primary sellers in recent weeks, as indicated by minimal changes in JPMorgan's bitcoin futures position indicator on CME futures.

Mt. Gox creditors are slated to receive 142,000 bitcoins, valued at approximately $9 billion. Although the final deadline extends to October, most repayments are expected in July. The analysts predict that this will momentarily depress crypto prices, but a rebound is likely from August onwards. Similarly, creditors of the bankrupt crypto exchange FTX are anticipated to receive cash repayments totaling $14 billion to $16 billion after October 7, potentially reinvigorating the market.

The analysts highlighted a key difference between in-kind repayments, which may prompt creditors to liquidate, and cash repayments, which could lead to reinvestments in crypto assets. They expect the latter to have a more positive impact on the market.

Overall, despite short-term pressures, the analysts remain optimistic about the long-term trajectory of the crypto market, anticipating a recovery phase following the initial liquidation wave.