Creditors of the collapsed cryptocurrency exchange FTX are poised to receive more than $12 billion in payouts over the coming months, raising hopes that a significant portion of this cash may be reinvested into digital assets, potentially injecting much-needed liquidity into the market.
The once-thriving crypto platform, which filed for bankruptcy last year, had $12.6 billion earmarked for customer repayments as of June. That figure could rise to as much as $16.5 billion after all assets are recovered and liquidated, according to court filings. While the initial payout of around $1.1 billion is relatively modest, some believe it could still have a noticeable impact on the sluggish crypto market.
Alex Thorn, head of research at Galaxy Digital Holdings, noted in a recent report that these payouts may offer some support to Bitcoin. “It’s likely that the first wave of these funds will provide a much-needed boost to the market,” he said.
Crypto traders are closely watching for any factors that might stir volatility and break Bitcoin and other tokens out of their extended lull. Despite October historically being a strong month for digital assets, the market has struggled to gain momentum. A gauge of the top 100 coins has fallen by 3% this month, with traders now questioning whether the year-long rally has reached its limits.
Benjamin Celermajer, co-chief investment officer at Magnet Capital, highlighted the potential for the FTX payouts to act as a catalyst for the crypto market. “Effectively, it’s giving liquidity to known crypto traders,” he explained. “It’s very likely that we see some of this flow back into crypto, providing a potential price catalyst to liquidity-starved markets.”
However, the repayment process is not expected to happen overnight. FTX still needs to establish a trust and appoint a company to manage the distribution of funds. Smaller creditors may start receiving payments as early as December, according to estimates by Galaxy Digital. Larger creditors, on the other hand, could wait until the first half of next year for their payouts, and full resolution of remaining claims might take up to three years.
Research firm K33 noted in a recent report that the “latent demand from FTX reallocators” could total as much as $2.4 billion, but it tempered expectations by cautioning that the impact on the crypto market might be gradual as payments will be distributed in waves over the next year.
The potential influx of liquidity comes at a time when the crypto market has been searching for new sources of momentum. Bitcoin reached a record high of nearly $74,000 in March, driven in part by strong demand for U.S. Bitcoin exchange-traded funds (ETFs). However, the token has since struggled to maintain its upward trajectory.
While it remains uncertain how much of the recovered FTX funds will flow back into digital assets, the upcoming payouts represent a glimmer of hope for a market that has been starved of liquidity and volatility. As creditors begin to receive their long-awaited funds, traders and analysts alike are keeping a close eye on the potential ripple effects across the broader crypto landscape.