How come 5GB can end-up taking 264 GB in Final Cut?

First, select your library in the browser Sidebar in FCP, and do File->Delete Generated Library Files…

Check all the options.

Then quit FCP and see how much free space you have.

Second, go to Final Cut->Settings->Playback and UNcheck “Bsckground render”; and in the Import section of the settings, UNcheck all the transcoding options.

FCP's "native language" for editing is ProRes.

When you start a new project, you tell FCP which codec to use for rendering:

All of those options use much greater amounts of memory than H.264 but allow FCP to operate more efficiently since it doesn't have to "decode" more compressed formats in real time.

If you measure ProRes options by data rate (Megabits per second or Mbps), then PR 4444 XQ has the highest at ~500 Mbps. The lowest data rate is PR 422 LT at ~147 Mbps. Uncompressed 10-bit is roughly equivalent to the quality of PR 422 but about 5 times more data used. You might find this document helpful deciding which is best for you:

https://www.apple.com/final-cut-pro/docs/Apple_ProRes.pdf

(Personally, I'm fine with PR422LT).

The amount of disk memory used for your projects will depend on your choice for rendering codec. (Render files can always be deleted or "trimmed" back to only those files currently in use. And by all means, do as Luis suggested: Turn off Background Rendering!!!!)

Also... you should move your libraries *off* the internal drive. A 500GB external SSD should be more than sufficient for editing (many) projects in FCPX. If you don't have one, they run about $25-30 for the SSD and you can save money by getting an enclosure (USB3) for the drive which will run about $10. Make sure the drive type and enclosure are compatible and the enclosure should support UASP (at least), S.M.A.R.T and TRIM. If you already have an external SSD and you can manage about 250GB or so free, go with that for the time being.

In general, it is not really advisable to be editing projects on your internal drive (which you may have already discovered the hard way: not being able to start up your Mac.)

After you have deleted all the generated files and stopped the background render process, remember this . . . if you ever delete your preferences, background render will start again automatically.

I have been caught out several times by that, so remember to deselect it.

One last thing. - don't get fixated on speed when buying an SSD or HDD. USB 3.0 is plenty fast enough for editing and any differences between say the Samsung T5 and T7 are likely to be minuscule in practice even though they strike terror into the hearts of speed seekers.