FTX’s approval for liquidating $3.4 billion worth of tokens this week, what impact will it have on the market?

FTX's $3.4 billion token liquidation approval this week, how will it impact the market?

Comprehensive compilation: Felix, LianGuaiNews

One of the most concerning events in the market this week is the court hearing regarding token sales application by FTX, which will take place on September 13th. According to the court documents submitted by FTX on August 23rd, FTX hopes to start selling, pledging, and hedging its large amount of cryptocurrency assets. FTX intends to return funds to creditors in the form of fiat currency instead of Bitcoin or Ethereum. As of April this year, FTX held $3.4 billion worth of cryptocurrency, so if the hearing is passed, it will result in a huge selling pressure. Therefore, it has attracted widespread attention in the market since last week, with FUD sentiment prevailing.

This matter is yet to be concluded. On one hand, the FTX token sales application will be heard by the Delaware Bankruptcy Court at 1 p.m. Eastern Time on September 13th, and it is unknown whether the court will approve it. Even if FTX is approved on September 13th, the liquidation may not be carried out all at once. It may be sold in batches on a weekly basis, and in preparation for the sale, FTX’s wallet has been transferring funds continuously.

Impact on altcoins

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The potential sell-off by FTX has caused market concerns, especially for altcoins owned by FTX. Records show that Solana is the largest part of its assets, valued at approximately $685 million.

This uncertainty has triggered panic among SOL investors. As of 12:00 on September 11th (Beijing time), SOL price has dropped by 4.6% in the past 24 hours, hovering around $18.36. This downturn is in stark contrast to most other tokens, which have maintained their original prices or experienced a slight decline.

In addition, FTX’s proprietary token FTT accounts for $529 million of the assets awaiting liquidation. The limited liquidity and market depth of FTT have raised doubts about FTX’s liquidation strategy.

FTX’s portfolio also includes a large number of other cryptocurrencies, such as Aptos, Dogecoin, Polygon’s MATIC, and XRP.

Different market opinions

Panic may be premature. In fact, FTX is concerned that a one-time sell-off could cause a price crash, resulting in a devaluation of its over $3 billion worth of cryptocurrency holdings. Therefore, according to the documents submitted, the sales limit is $100 million in tokens per week, with a maximum limit of $200 million per week.

In addition, industry insiders generally believe that the sales will not be conducted through exchanges but through OTC in a way that does not affect the market.

Crypto KOL MartyLianGuairty believes that FTX’s assets will not enter the public market and will not be traded through the exchange’s order book, thus not affecting the market. Crypto analyst Lark Davis also stated that most of the tokens held by FTX will not be sold on the exchange but through OTC. While BTC and ETH have a large quantity, they are sell-offs that the market can absorb. Aptos may be the only concern, but a significant drop will only occur if all the Aptos are sold at once. However, this will not happen because FTX’s creditors want to maximize the value obtained from these tokens.

However, the market is still concerned about the potential negative impact. Cryptocurrency analysis firm IntoTheBlock emphasizes that the bullish news for ETH and SOL seems to be overshadowed by market dynamics driven by fear. Despite the positive news of Visa expanding its stablecoin settlement feature to the Solana blockchain and partnering with merchant acquirer firms WorldLianGuaiy and Nuvei, as well as the potential approval of Ethereum spot ETF, the upcoming $3.4 billion liquidation on FTX may determine the market trend.

FTX Accelerates Recovery Measures

Recently, in addition to selling tokens, FTX has been actively seeking ways to recover assets in its financial difficulties and has taken a series of legal actions.

On September 10, FTX filed a lawsuit against the cross-chain interoperability platform LayerZero, seeking to recover $21 million. In addition, a legal lawsuit was filed against Ari Litan, the Chief Operating Officer of LayerZero, demanding a payment of $13 million and recovering $6.5 million from Litan’s company Skip & Goose.

In addition, FTX is reconsidering the recovery of promotional fees paid to sports celebrities. On September 11, the current management of FTX disclosed a detailed list of celebrities, companies, and sports teams that have been promoted by the exchange in a court document submitted to the bankruptcy court. Among them, FTX paid nearly $750,000 to former NBA star Shaquille O’Neal, approximately $308,000 to tennis player Naomi Osaka, nearly $206,000 to NFL player Trevor Lawrence, and approximately $271,000 to baseball star David Ortiz.

FTX acknowledges that the list itself may not reflect a comprehensive list of all deposits and repayments, but it is making efforts to identify all outstanding payments from previous years to determine how much can be recovered to repay debts. It is currently unclear whether all funds can be recovered or if any athletes or teams have requested refunds.

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