FTX restructuring plan takes effect, $16 billion compensation is about to start.

The FTX debtors' restructuring plan has officially come into effect, bringing new hope to investors. After nearly two years of range-bound battles, customers finally have the opportunity to file claims and receive compensation through official channels. The first round of distributions is expected to start within 60 days, with initial payouts estimated at around $1.2 billion. The total amount available for FTX to repay customers and debtors is between $14.7 billion and $16.5 billion.

This news has left creditors ecstatic, and although cash payouts may lead to potential losses, the long road to debt collection has finally reached its end. However, for the market, this is a double-edged sword. On one hand, FTX's payouts may bring new liquidity; on the other hand, the sell-offs made to raise funds have also cast a shadow over certain cryptocurrencies.

The FTX collapse two years ago had a profound impact on the cryptocurrency industry. It not only led to hundreds of crypto companies facing difficulties and numerous investment firms suffering losses, but also severely undermined the mainstream acceptance of cryptocurrencies that had just begun to recover. The misconduct of SBF and his team, such as misusing funds and financial fraud, sparked immense anger among users.

In November 2022, FTX and its more than 130 affiliated companies filed for bankruptcy. The initially estimated funding gap was $8 billion, but as the investigation deepened, the final claims exceeded 36,000, with total liabilities amounting to approximately $16 billion.

Since then, creditors and FTX have entered a long range-bound battle. Rumors of a restructuring plan have emerged repeatedly, with varying reactions from the market. In early 2023, the new CEO John J. Ray III stated plans to restart the exchange, but at the time, almost no one paid attention. It wasn't until April that the restructuring plan was mentioned again, prompting the market to take notice. In May, the FTX 2.0 plan was confirmed, and in June, several well-known companies even expressed interest in acquiring it.

Affected by the news, the market's confidence in the restructuring plan is gradually strengthening. In November 2023, SEC Chairman Gary Gensler stated that restarting FTX within a legal framework is possible, which officially led the market to start pricing in the restructuring narrative. However, as the court confirmed that the intrinsic value of the FTT token is zero, holders' hopes were once again dashed.

Despite the shattered dreams of FTT, compensation for creditors has become a reality. In February 2024, FTX announced that it had sufficient funds to fully pay all approved claims. On October 8, a U.S. court officially approved FTX's restructuring plan, involving amounts exceeding $14 billion.

On January 3, the FTX debtors' restructuring plan officially came into effect. The first batch of debts will begin to be repaid within 60 days. Creditors must complete tax form submissions and KYC verification by January 20. The first batch of repayments primarily targets users with a claim amount of $50,000 or less, accounting for 98% of total users, who will receive compensation valued at 119% of their claims. The first batch of repayments is expected to be $1.2 billion, and the repayment schedule for the remaining funds has yet to be determined.

However, for creditors, this is not a perfect ending. FTX can only compensate in the form of stablecoins and fiat currencies, and the amount of compensation is based on the value as of the application date (mainly concentrated around November 2022). Considering that the price of Bitcoin at that time was only around $16,000, while it has now surpassed $95,000, the actual compensation is vastly different compared to the current market value.

Some large creditors expressed dissatisfaction and hope to be compensated in the form of physical Bitcoin. However, the FTX liquidation team stated that the actual Bitcoin holdings at the time of takeover were only 0.1% of the book amount, which could not meet this demand.

Nonetheless, most creditors expressed satisfaction with the compensation outcome, believing that recovering some funds is better than nothing at all. At the same time, this massive compensation has also drawn market attention, leading people to speculate about the source and flow of the $16 billion.

FTX's funds mainly come from its cryptocurrency asset holdings. A shareholder report at the end of August 2023 showed that the top 10 cryptocurrencies held by FTX accounted for 72% of its total cryptocurrency asset holdings, with a total value of approximately $3.2 billion at that time. Among them, SOL had the largest holding, reaching 55 million coins, BTC held about 21,000 coins, and ETH held 113,000 coins.

Since the start of the restructuring plan, FTX has been gradually selling off crypto assets to raise funds. In early 2024, FTX liquidated all GBTC holdings, approximately 20,000 BTC. In October and December, FTX sold SOL multiple times.

Currently, the total amount of crypto assets held by FTX is $1.343 billion. There are 20 cryptocurrencies with holdings exceeding one million dollars, among which FTT has the highest value at $626 million, followed by OXY at $301 million, and both MAPS and Media also surpass $100 million.

The sell-off of these assets may impact the prices of related cryptocurrencies in the short term, especially those with lower liquidity or high FTX holding concentration. FTT may face the most pressure, while cryptocurrencies such as OXY, MAPS, MEDIA, FIDA, BOBA, SRM, AMPL may also be affected.

Currently, the FTX addresses are preparing for payouts, with funds flowing to the exchange daily, but it has not yet had a significant impact on coin prices. The market seems to be looking at this selling pressure from a long-term perspective.

Some industry insiders are optimistic that the $16 billion payout could stimulate the next round of growth in the cryptocurrency market in 2025, driving Bitcoin to new highs. This perspective is not unfounded; for example, in the case of Gate.io, most creditors chose to continue holding Bitcoin rather than selling after receiving the payout.

However, the choice of FTX creditors will depend on individual preferences. It is noteworthy that due to the lengthy debt collection process, most original creditors may have sold their claims to claims companies, making the likelihood of these funds being recovered lower.

Nevertheless, a portion of the funds that flow out of the crypto market will always flow back in, which is still good news for the crypto space that often faces liquidity shortages.

The current market is still in a period of uncertainty. Factors such as rising macroeconomic data, geopolitical turmoil, and the U.S. debt crisis have increased the market's risk aversion sentiment, putting pressure on risk assets. Recently, wildfires in California have exacerbated market concerns over liquidity.

In the face of these challenges, the cryptocurrency market has shown a certain level of resilience. Although it may face volatility in the short term, the long-term outlook remains optimistic. The expectation of Trump's presidency has provided some support for Bitcoin. Reports suggest that the Trump team is working with leaders in the crypto industry to develop relevant policies, which may involve topics such as "de-banking."

As of the time of writing, BTC is priced at 95,452 USD, ETH is priced at 3,183 USD, and the market is still closely monitoring further developments.