Will FTX Liquidate $3.4 Billion In Bitcoin And Crypto?

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FTX, the bankrupt cryptocurrency change, is slated to seem in Delaware Chapter Court docket on Wednesday, September 13, to hunt approval for the liquidation of $3.4 billion in Bitcoin and crypto belongings. The occasion has raised issues amongst market analysts and members, who concern that the sale might put vital promoting strain on an already struggling market.

As of January 17, FTX’s crypto holdings have been estimated to incorporate $685 million in locked Solana (SOL) tokens, $529 million in FTT tokens, $268 million in Bitcoin (BTC), $90 million in Ethereum (ETH), and varied different belongings together with Aptos ($67 million), Dogecoin ($42 million), Polygon ($39 million), XRP ($29 million), and stablecoins. A further $1.2 billion is held in crypto on third-party exchanges.

FTX Bitcoin and crypto holdings — FTX holdings as of January 2023 | Supply: Twitter @TheDeFinvestor

Is A Selloff Looming For Bitcoin And Crypto?

On August 24, FTX proposed a plan to nominate Mike Novogratz’s Galaxy Digital because the funding supervisor answerable for overseeing the sale and administration of those recovered belongings. In line with the plan, FTX can be allowed to promote as much as $100 million price of tokens per week, a restrict that might be elevated to $200 million on a person token foundation. Whereas these propositions usually are not but legally binding, they’re anticipated to be reviewed and probably authorised by the Delaware Chapter Court docket on September 13.

The market’s main concern is the potential impression of those gross sales. Billions of cash might hit the market within the creditor sale, and there’s widespread concern that the market could solely recuperate as soon as this overhang has been progressively eradicated. Nevertheless, it’s essential to separate truth from fiction on this state of affairs.

First, it’s extremely unlikely that these cash shall be offered en masse on the open market. Second, there’s the proposed restrict per week. Third, it’s extremely possible that the majority cash shall be offered Over-The-Counter (OTC), and those who aren’t shall be offered progressively through market makers.

Trying on the holdings, it turns into clear that an enormous chunk of tokens is in FTT and Solana. Remarkably, FTX’s SOL holdings are locked and can solely be absolutely vested in 2025 or later (till 2028). Any sale would contain a purchaser taking on FTX’s vesting contract.

Whereas FTX’s FTT tokens are marked at $529 million, their present market cap is just $350 million, elevating questions on who would purchase this considerably devalued asset. As for Bitcoin and Ethereum, the quantities held by FTX are substantial however not massive sufficient to trigger market-wide disruptions. Aptos, with a market cap of $1.17 billion and $67 million price of APT to be offered, is the one asset that might doubtlessly trigger concern, however solely whether it is offered unexpectedly, which is unlikely given the intent to maximise worth.

Furthermore, even when the court docket grants approval for the asset sale on September 13, the precise sale received’t begin instantly. Regulatory our bodies just like the SEC and CFTC are anticipated to supervise the gross sales, guaranteeing they’re carried out in a fashion that doesn’t hurt buyers. An underwriter will possible handle the liquidation course of, guaranteeing compliance with all legal guidelines and rules. This course of, which includes danger evaluation and discovering appropriate patrons, is predicted to span a number of months.

In abstract, whereas there shall be some promote strain, a sudden and big sell-off is each unlawful and unbelievable. The concern and uncertainty (FUD) surrounding the occasion appear to be extra damaging than the occasion itself. Bitcoin and crypto market members are urged to remain knowledgeable and keep away from succumbing to panic and misinformation.

Because of the rumors, the SOL worth plummeted by greater than 7% yesterday. The Bitcoin worth noticed a slight downward motion and was buying and selling at $25,859 at press time.