FTX officially announced that it will not restart, FTT's rebirth is a meme

Author: jk, Odaily Planet Daily

On Wednesday, January 31, U.S. local time, the bankrupt cryptocurrency exchange FTX informed the court that it expects to fully repay its customers. This statement was made public during a court hearing, and U.S. bankruptcy judge John Dorsey has tentatively approved this date, although a significant portion of creditors disagree with it.

According to court procedures, FTX has abandoned its plan to restart its platform and is instead focusing on fully repaying its former customers. Due to a lack of buyers, FTX has given up on its plan to restart its platform. Advisors conducted a thorough search in the market to find investors willing to restart FTX, but no one was willing to provide the cash needed to restart the exchange.

FTX lawyer Andrew Dietderich stated that the repayment process will require claimants to submit proof to verify that they indeed held and lost assets on FTX. This process will be reviewed by restructuring advisors.

Is the platform token FTT still useful?

FTX's native token FTT briefly rose after the announcement of the company's plan but then plummeted sharply. A few days ago, the price of FTT fluctuated around $2.65, but it has now dropped to about $1.91, with a low of $1.65, marking a 7-day decline of 27.04%.

FTT price trend, source: Coinmarketcap

This market reaction is actually to be expected. Based on the previous expectations of a restart, the appreciation of FTT was predicated on the possibility of FTX restarting and potentially reusing FTT as its native token, or exchanging FTT at a certain ratio to issue new native tokens. However, this expectation was shattered when FTX announced it would not restart; after abandoning the restart, FTT has essentially lost its new utility, and as FTX continues to liquidate assets to compensate customers, the value of FTT will inevitably decline further due to sell-offs.

In the worst-case scenario, FTT may ultimately become like Luna Classic after the Terra collapse, becoming a de facto memecoin that fluctuates with each piece of news but is highly unlikely to return to its previous highs.

Full repayment: good news, but at what asset price point?

FTX previously reported that there were over 36,000 claims totaling approximately $16 billion. Last year, it stated that it could only repay about 90% of its customers. Now, the intention to fully repay customers is naturally better news, but it raises a subsequent question; FTX is likely unable to repay customers in the original token types, so if it repays in USD value, what time point's USD value will be used?

Before the collapse of FTX, the value of Bitcoin was around $20,000. If based on the time of FTX's bankruptcy announcement, the value of Bitcoin was about $16,000, and now it is around $43,000, the difference is substantial. "Many claims were made based on the significant decline in currency value during that turbulent period," said Kris Hansen, a lawyer for the FTX creditors' committee, during Wednesday's hearing.

According to Bloomberg, U.S. bankruptcy judge John Dorsey ruled that the scale of each claim will be based on the amount owed to customers or creditors on the day FTX filed for bankruptcy. Dorsey also approved rules for estimating the amounts owed to each creditor and customer. Some customers complained that fixing their claims at the end of 2022 would cause them to miss out on the opportunity for digital asset price increases. Dorsey ruled that bankruptcy rules require the company's debts to be linked to the date it sought court protection. Thus, this is similar to what was previously reported by Odaily, where FTX proposed to value claims based on Bitcoin at around $16,000, which would undoubtedly lead to significant losses for creditors.

On the bright side, if it weren't for this recent small bull market starting in 2023, the remaining cryptocurrency assets after FTX's bankruptcy might not be enough to repay all investors. In other words, repaying at recent prices is almost impossible, but this round of appreciation has made it possible for FTX to repay at the prices of November 2022.

"I hope the court and stakeholders understand this is not a guarantee, but a goal," Dietderich said. "There is still a lot of work and risk between us and this outcome. But we believe this goal is achievable, and we have a strategy to achieve it."