FTX debt compensation starts! Most FTX funds are unlikely to flow back into the crypto market, don’t think too much about the reasons?

FTX Bankruptcy Liquidation Enters Critical Stage, Creditors Finally Receive First Fund Distribution Sunil, a well-known FTX creditor, stated on February 17 that FTX will begin the first payment on February 18, 2025 at 10 AM EST / 11 PM Taiwan time. This payment will primarily target small creditors (under $50,000), with large creditors to be processed in stages. Small creditors will benefit the most, receiving a 119% payout. According to Sunil's data, creditors with claims under $50,000, totaling around $1.2 billion, will receive a 119% payout rate (Taiwan 7A users mostly show 120.5%), meaning they will not only recover the principal but also receive additional compensation. However, there are still about $345 million in claims that have not yet passed the KYC (identity verification) process, which may affect the timing of fund distribution for some creditors. Large creditors will receive payouts in stages. For creditors with claims over $50,000, the total claim amount exceeds $17 billion. The first phase plans to pay out around $7 billion, expected to begin in the second quarter of 2025, with subsequent payouts dependent on the progress of the liquidation. Market Impact: Creditor Fund Flows Closely Watched The distribution of these funds will have a significant impact on the crypto market, particularly how the funds will affect market liquidity. Sunil stated that of the $800 million in the first distribution, approximately 50% ($400 million) will go to "creditor buyers," and the other 50% ($400 million) will go to the original holders. Creditor buyers are unlikely to reinvest the funds back into the crypto market, as these institutions are typically traditional financial investors aiming to profit from discounted claims, rather than increasing their crypto investments. The original holders may partially reinvest in the market, but are unlikely to use all the funds for crypto investments, meaning that while some funds will flow into the market, the overall impact may not be as strong as expected. FTX Liquidation Enters Critical Period, What's Next for the Crypto Market? The FTX bankruptcy case continues to impact market liquidity, and although some creditors can receive overpayments, a large amount of funds flowing to traditional financial institutions may weaken the market's expectations of these funds returning to the crypto market. As the subsequent large-scale payouts unfold, the market will need to closely monitor the long-term impact of creditor distribution on cryptocurrency prices.