FTX may be approved to liquidate $3.4 billion worth of tokens this week. What impact will it have on the market?

FTX's potential approval to liquidate $3.4 billion worth of tokens this week market impact?

FTX may obtain court approval for asset liquidation on September 13th. Under the pressure of 3.4 billion sell-offs, things may not be as bad as imagined.

Compiled by: Felix

One of the most concerning things in the market this week is that FTX will have a court hearing on September 13th regarding its token sale application. According to court documents submitted by FTX on August 23rd, FTX hopes to start selling, pledging, and hedging its large amount of cryptocurrency assets. FTX hopes to return funds to creditors in the form of fiat currency rather than Bitcoin or Ether. As of April this year, FTX held cryptocurrency worth 3.4 billion US dollars, which means a huge sell-off if the hearing is approved. Therefore, it has attracted widespread attention in the market since last week and has caused FUD sentiment.

This matter has not yet been concluded. On the one hand, FTX’s token sale application will be heard by the Delaware Bankruptcy Court at 1:00 PM Eastern Time on September 13th, and it is still unknown whether the court will approve it. Even if FTX is approved on September 13th, the liquidation may not be carried out immediately in one go. It may be sold in batches on a weekly basis, and preparations for the sale may have been made. FTX’s wallets have been transferring funds since last week. (Related reading: FTX wallet transfers tens of millions of dollars in tokens, will the sell-off begin?)

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Altcoins affected

FTX’s possible sell-off has caused market concerns, especially for the altcoins owned by FTX. Records show that Solana is the largest part of its assets, worth about 685 million US dollars.

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

In addition, FTT, the exchange’s proprietary token, accounts for 529 million US dollars of the assets to be liquidated. The limited liquidity and market depth of FTT have raised doubts about FTX’s liquidation strategy.

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

Different market views

Panic may be premature. In fact, FTX is concerned that a one-time sell-off could cause price crashes and reduce the value of its cryptocurrency holdings of over 3 billion US dollars. Therefore, according to the documents submitted, the sell-off limit is 100 million US dollars in tokens per week, with a maximum limit of 200 million US dollars per week.

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

Crypto KOL MartyLianGuairty believes that FTX assets will not enter the public market and will not affect the market as they are not traded through the exchange’s order book. Cryptocurrency analyst Lark Davis also stated that FTX’s held tokens will not be sold on the market, and most will be traded over-the-counter (OTC). The quantities of BTC and ETH are large, but they are sell pressure that the market can absorb. Aptos may be the only concern, but a major drop will only occur if all Aptos are sold at once. However, this is unlikely to happen as FTX creditors want to maximize the value from these tokens.

However, the market is still worried about the potential negative impact. Crypto analytics firm IntoTheBlock emphasizes that the bullish news about ETH and SOL seems to be overshadowed by fear-driven market dynamics. Despite positive news about Visa expanding its stablecoin settlement functionality to the Solana blockchain and collaborating with merchant acquirers WorldLianGuaiy and Nuvei, as well as the potential approval of an Ethereum spot ETF, the upcoming $3.4 billion FTX liquidation will likely determine the market trend.

FTX Accelerating Recovery Measures

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

On September 10th, FTX filed a recovery lawsuit against the LayerZero interoperability platform, 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 a recovery of $6.5 million from Skip & Goose, a company owned by Litan.

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