Crypto News: How Can FTX Payout Impact The Crypto Prices?

Key Insights:

• In the latest crypto news, FTX starts repaying $5 billion in stablecoins today, as traders prepare for volatility.
• Many creditors are left frustrated as the payout is at late 2022 prices: 1 BTC = $30K, 1 = SOL $30, 1 ETH = $3,900
• The FTX unravel reminds investors of the perils of keeping their digital assets on a centralized exchange

The robust FTX payout of $5 billion in stablecoin to creditors is finally rolling out today. After three tense years of waiting, the ripple effect of so much sudden liquidity has investors nervously eyeing the crypto market.

If the chatter across crypto news is anything to go by, the volatility is just beginning.

Crypto News: FTX Payout to Spark Market Volatility

In the crypto news today, this FTX payout isn’t a run-of-the-mill reimbursement. $5 billion represents nearly 2% of the entire stablecoin supply, hitting the pockets of thousands of FTX victims (and, by proxy, flowing back into the crypto market).

The direct payments are executed at the crypto prices reflected in late 2022. (1 BTC = $30K, 1 SOL = $30, 1 ETH = $3,900, pricing roughly unchanged).

This has drawn both relief and ire, especially from those watching today’s much higher valuations.

Only Ethereum holders of the top-cap coins fare reasonably well, with late 2022 Ether prices at $3,900, not far from its ~$4,100 ETH price today.

The second wave of these repayments is supported by platforms like BitGo and Kraken. It is likely to cause volatility in the crypto market as it heads into Q4, historically its best-performing quarter.

As altcoin trader Mario Nuwfal commented:

“The next pump is sponsored by FTX.”

Some analysts, like Crypto Rover, believe this surge in stablecoin liquidity could funnel straight into Bitcoin, Ethereum, and other altcoins.

This would drive crypto prices higher if recipients decide to reinvest in the crypto market.

Yet, the liquidity unlock works both ways. There could also be a sell-off as investors cash out, especially given the discrepancy with current market valuations.

Why Are FTX Creditors Frustrated?

Recipients are being paid based on the snapshot prices at FTX’s collapse, not today’s spot prices.

That means early claimants who held Bitcoin, Solana, or other altcoins are receiving those prices even as spot prices are orders of magnitude higher today on many coins.

With the court-approved bankruptcy plan, the vast majority (about 98% of affected creditors) will receive at least 118% of their original claim value in cash.

For high-value claims and latecomers, however, the figures may feel paltry compared to what they lost. The feeling among many is bittersweet: a painful chapter closes, but the scars remain.

Lessons from the FTX Collapse

Three years ago, FTX’s implosion sent shockwaves through the industry. Behind its collapse were allegations of fraud, risky cross-company dealings (especially with sister firm Alameda Research), and rapid insolvency.

A dramatic run on deposits exposed an $8 billion shortfall.

What followed next was not just a loss of billions. It was a nail-biting episode in crypto history that pulled the trigger on Operation Chokepoint 2.0 and reshaped crypto custody.

Traders and investors learned the risks of keeping assets on crypto exchanges the hard way. And institutions and politicians blacklisted the crypto market for a while.

FTX CEO Sam Bankman-Fried, once crypto’s golden boy, is now serving a 25-year prison sentence, with $11 billion ordered to be repaid.

For anyone still parking their funds on centralized exchanges, the FTX implosion was a wake-up call. In crypto, it’s not just hacks and volatility you need to worry about.

There’s also mismanagement, opaque accounting, and questionable practices on Caribbean islands that can vaporize your wealth overnight.

Crypto Market Risks: Exchange Custody Still a Gamble

The entire FTX debacle is a reminder of the danger of trusting an exchange with custody of your coins. As seen by FTX’s collapse, exchanges can fail for reasons out of the average trader’s control.

Even with legal intervention, investors suffered significant losses. There is literally not a soul in the crypto market who would sell their BTC for $30K today.

Whether new buyers flood in or sellers cash out in droves, everyone should remember to withdraw their assets to a private wallet quickly. Keeping coins on an exchange is never risk-free.