Bankrupt crypto exchange FTX has received permission from a bankruptcy court to liquidate its cryptocurrency assets to pay back investors. This means bankruptcy management can now dump its massive pile of crypto holdings, which is said to be worth over $3.4 billion.
Judge John Dorsey of the US Bankruptcy Court for the District of Delaware on Wednesday, September 13, approved the FTX motion filed in August, allowing the new FTX management to sell, stake, and hedge its $3.4 billion of crypto assets.
💥BREAKING: FTX GETS APPROVAL TO DUMP $3.4 BILLION WORTH OF #CRYPTO! $SOL: $1,160,000,000$BTC: $560,000,000$ETH: $192,000,000$APT: $137,000,000$XRP: $119,000,000$BIT: $49,000,000$STG: $46,000,000 pic.twitter.com/jjt3ejdoUA
— Crypto Rover (@rovercrc) September 13, 2023
According to the offloading plan outlined in the August motion, Mike Novogratz’s Galaxy Digital will serve as an investment manager overseeing the sale of assets. The sale will be capped at $100 million worth of tokens per week, a limit that could be increased to $200 million on an individual token basis.
As per the motion, FTX will also hedge and stake some of the assets to minimize the price volatility risk and earn passive income on more mainstream crypto assets like Bitcoin [BTC] and Ether [ETH].
The Looming Danger of Market Crash
A court filing on Monday, September 11, reveals that FTX has a portfolio of $3.4 billion worth of liquid crypto assets. The composition of this portfolio, based on the August 31 price, includes $1.16 billion worth of Solana [SOL], $560 million of Bitcoin [BTC], $196 million of Ether [ETH], $137 million of Aptos [APT], $120 million in Tether, $119 million of XRP, and other lesser known illiquid and small quantity assets.
As these assets will now dumped into the market, a violent market movement or crash is a fair question to discuss. Solana [SOL] carries the biggest threat of violent price movements, given its size in the FTX portfolio. The price of Solana plunged more than 6% on Monday amid fears that FTX may soon liquidate significant portions of the token and other Solana-affiliated crypto assets.
Following the court permission news, there was a sudden tiny drop in Bitcoin and Solana prices that could grow in size once the sale commences. However, some analysts are saying that the upcoming dump does not pose a significant threat to SOL, as some 26 million Solana tokens are vested in a wallet that can not be unlocked until 2028.
So, only the wallet key will be sold. FTX only hold 7 million SOL token that has already been sold to the Solana Foundation. The transfer of these tokens is yet to happen, and “there is no more Solana to sell.”
This is Alamedas Solana wallet which has the rights to the 26,740,743 staked $SOL from 2025-2028.
This wallets keys will be sold in the FTX liquidation. Not the $SOL which cannot be unlocked until 2025-2028.
As Ive been posting for weeks – FTX/Alameda only hold 7m $SOL and… pic.twitter.com/WeIkCKf2Ek
— MartyParty (@martypartymusic) September 13, 2023
According to Messari, the liquidation impacts of BTC, ETH, SOL, and APT will be manageable. However, the liquidation of DOGE, TRX, and MATIC can have a higher impact on the market.
FTX LIQUIDATIONS UPDATE
FTX liquidators hold approximately $1.3 billion of liquid crypto assets (excluding stablecoins) which have been dragged down by fear of FTX liquidations potentially beginning Wednesday.
Largest holdings: $SOL, $BTC, $ETH, $APT, $DOGE, $TRX, $MATIC… pic.twitter.com/ki3l6xKgPf
— Messari (@MessariCrypto) September 11, 2023
However, the threat of short-selling is still there for other tokens as well. Two FTX customers highlighted the market issue in court but were overruled by the judge. FTX said that it is keenly aware of these risks and, therefore, has hired Galaxy Digital as an advisor to manage the risk that information leakage would lead to short-selling activity and sharp declines in crypto prices.
There is yet more for the crypto community to relax as Andrei Grachev, head of DWF Labs, and Justin Sun have shown interest in purchasing FTX assets to save the crypto market from the severe impact of these selling.
Contemplating an offer for FTX's holding tokens and assets to reduce their selling impact on the crypto community. Let's unite to bolster our crypto ecosystem!🙏
— H.E. Justin Sun 孙宇晨 (@justinsuntron) September 11, 2023
The crypto market has shown its resilience in the past. The market could see a short-term decline because of upcoming FTX dumps, but not an unrecoverable dent. According to crypto analyst MartyParty, the $100 million per week sale is never going to impact the market much.
Solana 24hr volume is between 350m and 450m (per day). Even if FTX sold every $SOL they have in their wallet thats only $128.6m at todays price. Not even a drip. Even if all tokens are unstaked, the weekly cap is $100m allowed to sell. 7 * 350m is $2.5b volume a week at $18…
— MartyParty (@martypartymusic) September 13, 2023
