Update 11:00 am UTC: This article has been updated to include quotes from Philipp Zentner.
FTX is preparing to distribute more than $1.2 billion in repayments to the bankrupt former cryptocurrency exchange’s users.
FTX, once the world’s second-largest centralized cryptocurrency exchange (CEX), is set to begin repaying users who have been unable to access their funds for over two years.
Exchange users who are owed up to $50,000 worth of digital assets have until Jan. 20 to fulfill their repayment requirements.
FTX will likely start repaying claims of up to $50,000 after Jan. 20, according to FTX creditor Sunil, who is part of the largest group of more than 1,500 FTX creditors, the FTX Customer Ad-Hoc Committee.
“Jan 20th: FTX has given until 20th Jan to fulfill pre-distribution requirements for initial distribution. Repayments likely won’t start before then,” Sunil wrote in a Jan. 11 X post.
FTX pre-distribution requirements, court filing. Source: Sunil
The Jan. 20 deadline coincides with US President-elect Donald Trump’s inauguration, which has sparked expectations of more crypto regulatory clarity and the possible acceptance of the Bitcoin Act. The act proposes creating a Bitcoin (BTC) reserve for the US, the world’s largest economy.
Combined with new capital from the upcoming FTX repayments, Jan. 20 could catalyze the next leg up in the 2025 crypto market cycle, which could see Bitcoin surpass $200,000, according to some industry watchers.
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Will FTX repayments lead to crypto market volatility?
Users claiming up to $50,000 are the first group of investors to receive repayments, according to FTX’s restructuring plan, which was approved in October 2024. The plan stated that 98% of FTX users could expect to be paid 119% of the declared value of their funds.
However, some creditors have criticized the repayment model, which reimburses claimants based on cryptocurrency prices at the time of bankruptcy. Bitcoin prices, for example, have increased by more than 370% since November 2022.
While some crypto investors expect heightened market volatility, the FTX repayments are crucial for rectifying past damages and repairing the industry’s reputation.
The repayments will lead to mixed investor reactions, depending on individual risk appetite, according to Anndy Lian, author and intergovernmental blockchain expert.
Lian told Cointelegraph that some of the repayments may flow back into other cryptocurrencies:
“Smaller investors, who’ve been hit hard by FTX’s collapse, might be more inclined to sell for financial security. Those with a bit more faith in the long-term prospects of crypto might stick it out, betting on future growth. It’s all about individual circumstances and risk appetite.”
“The MT. Gox scenario does set a precedent, where a lot of folks chose to hold onto their coins hoping for better days,” Lian added.
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Most Mt. Gox creditors have opted to hold their BTC despite Bitcoin’s over 8,500% value appreciating in the 10 years since the Japanese exchange collapsed.
On July 30, Mt. Gox completed 41.5% of its Bitcoin distribution to creditors, who received a total of 59,000 Bitcoin.
Despite receiving nearly $4 billion worth of Bitcoin, the Mt. Gox creditors weren’t selling, according to a July 29 Glassnode report, which stated:
“Creditors opted to receive BTC, rather than fiat, which was new in Japanese bankruptcy law […] As such, it is relatively likely that only a subset of these distributed coins will be truly sold onto the market.”
The incoming $1.2 billion could be a “significant liquidity event for crypto,” according to Philipp Zentner, co-founder and CEO of LI.FI protocol. He told Cointelegraph:
“Overall it’s a macro-positive moment for the industry, particularly given the favorable current market conditions, also prices right now feel like a ‘Black Friday’ sale for crypto.”
Crypto firms BitGo and Kraken announced in December that they would assist in distributing recoveries to FTX users. Assuming all users file complete claims, the exchange could be expected to pay out roughly $16 billion.
How bad is the FTX collapse for Bitcoin? OOnchainanalyst explains. Source: YouTube
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