FTX Digital Markets, the Bahamian unit of the collapsed cryptocurrency exchange FTX, is set to repay the first group of creditors on Feb. 18 in a significant development for the crypto industry following the exchange’s almost $9 billion collapse.
The downfall of FTX and more than 130 subsidiaries launched a series of insolvencies that led to the industry’s longest-ever crypto winter, which saw Bitcoin’s (BTC) price bottom out at around $16,000.
In a key moment for the crypto industry’s recovery, FTX’s Bahamas wing will honor the first batch of repayments for users who are owed less than $50,000 worth of claims.
Users will receive their funds at 3:00 pm UTC on Feb. 18, according to a Feb. 4 X post from FTX creditor Sunil, who is part of the largest group of more than 1,500 FTX creditors, the FTX Customer Ad-Hoc Committee.
The repayments will bring an estimated $1.2 billion worth of capital to the first wave of defrauded FTX users.
Source: Sunil Trades
The FTX repayments are being viewed as a positive signal for the crypto industry’s recovery, according to Alvin Kan, chief operating officer at Bitget Wallet.
The $1.2 billion repayments may see “a significant portion reinvested into cryptocurrencies, potentially impacting market liquidity and prices,” he told Cointelegraph.
“This event could boost investor sentiment by demonstrating market recovery from the FTX collapse, though the sentiment might be mixed due to the payout being based on lower 2022 valuations,” Kan said.
“The scale of this repayment marks a notable event in terms of both capital flow and the psychological impact on crypto investors,” he added.
Despite the positive news, 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.
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FTX repayments a victory for justice, but market impact limited
While the first FTX repayment represents a significant step forward, the capital may only have a limited effect on the cryptocurrency market.
While it may not be a “market-moving catalyst,” the first FTX payout represents a significant victory for justice and overall market sentiment, according to Magdalena Hristova, public relations manager at Nexo:
“The collapse impacted many investors and cast a shadow over crypto. For retail investors, especially those without diversified portfolios, these repayments offer not just the return of funds but a sense of stability and peace of mind.”
Related: Bankruptcy law firm S&C absolved from misconduct, according to new FTX proposal
Since the first batch of repayments is limited to creditors with claims under $50,000, the reinvestment rate into crypto assets may be relatively low. Many recipients may opt for safer investments rather than reentering the volatile digital asset market.
The FTX repayment process remains ongoing, with larger creditors awaiting further announcements regarding their claims.
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