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FTX Crypto Purge: Court Gives Green Light To $3.4 Billion Liquidation Blitz

  • September 14, 2023

In a significant development for the cryptocurrency market, the bankrupt exchange FTX has received court approval to liquidate its crypto assets worth over $3.4 billion. The decision, delivered by Judge John Dorsey, overruled objections and permitted FTX to proceed with selling, staking, and hedging its holdings. 

The exchange had submitted a filing in August, arguing that such activities would mitigate downside risks and generate returns on idle digital assets for the benefit of the estates and creditors.

FTX Authorized To Liquidate Digital Assets Holdings

FTX’s crypto assets include several notable holdings, with $1.1 billion in SOL (Solana), $560 million in BTC (Bitcoin), $192 million in ETH (Ethereum), $137 million in APT, $119 million in XRP, and $46 million in STG. 

However, concerns have arisen within the crypto community regarding the potential implications on the prices of these cryptocurrencies as a result of the liquidation.

On this matter, renowned crypto expert Michael Van de Poppe suggests that the market impact of FTX’s approval to sell $3.4 billion in crypto assets, combined with worse-than-expected Consumer Price Index (CPI) data, is expected to be limited. 

Market participants anticipate that FTX’s selling activities, including the weekly sale of up to $200 million of assets for corresponding clients, may exert some additional selling pressure, but this is likely already factored into current market prices.

Notably, a significant aspect of FTX’s holdings is Solana, which comprises a substantial portion of the exchange’s assets. Van de Poppe highlights that the majority of SOL is staked, rendering it unavailable for sale. 

Only approximately 7 million SOL, a majority of which have already been liquidated, can be sold. This factor plays a pivotal role in shaping market expectations, as the anticipation of a massive sell-off in Solana may not materialize due to the limited supply available for sale.

According to Van de Poppe’s analysis, FTX’s approved liquidation plan aims to address its liabilities through a gradual asset sell-off. While this strategy may have some short-term market impact, it is anticipated that the “sell the rumor, buy the news” phenomenon could come into play, particularly in light of the recent sell-off of Solana observed in the past week.

FTX’s court-approved liquidation of its crypto assets marks a significant development in the crypto landscape. The implications on market prices, investor sentiment, and the broader crypto community will be closely monitored as FTX navigates the process of selling, staking, and hedging its holdings. 

FTX
SOL’s 1.6% gain over the past 24 hours on the daily chart. Source: SOLUSDT on TradingView.com

As of the time of writing, the price of SOL stands at $18.11, exhibiting a 1.6% surge within the past 24 hours. Notably, this positive price action defies expectations of a substantial sell-off following the recent news concerning FTX’s crypto holdings and the court’s green light for the liquidation plans of the defunct cryptocurrency exchange.

Featured image from iStock, chart from TradingView.com

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