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

Comprehensive editor: Felix, PANews

One of the most concerning things in the market this week is that FTX will conduct a court hearing on its token sale application on September 13. According to court documents filed by FTX on August 23, FTX hopes to start selling, pledging and hedging its large amount. Cryptocurrency assets. FTX wants to return funds to creditors in fiat currency rather than Bitcoin or Ethereum. As of April this year, FTX holds $3.4 billion worth of cryptocurrencies. If the trial is passed, it will mean huge selling pressure. Therefore, it has attracted widespread attention in the market since last week, and FUD emotions are everywhere.

The matter has not yet been decided. On the one hand, the FTX token sale application will be heard by the Delaware Bankruptcy Court at 1:00 pm ET on September 13. Whether the court can pass it is still unknown. Even if FTX is approved on September 13, the liquidation may not start immediately and will be sold in batches week by week. In order to prepare for the sale, FTX wallets have been transferring last week. (Related reading: FTX wallet transfers tens of millions of dollars in tokens, may the sell-off wave begin?)

Altcoins affected

The possible sell-off of FTX has sparked concerns in the market, especially the altcoins owned by FTX. Records show Solana is the largest portion of its assets, worth about $685 million.

This uncertainty triggered panic among SOL investors. As of 12:00 on September 11 (Beijing time), the price of SOL fell 4.6% in the past 24 hours and is currently hovering around $18.36. This downturn is in stark contrast to most other coins, which have largely maintained their prices or fallen slightly.

Additionally, the exchange’s proprietary token FTT accounts for $529 million of assets to be liquidated. FTT’s limited liquidity and market depth raise questions about FTX’s liquidation strategy.

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

Market opinions vary

It may be premature to panic. In fact, FTX feared that the one-time sale would cause prices to plummet, eroding the value of more than $3 billion in cryptocurrency it held. Therefore, according to its filing, the selling 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 sale will not be through the exchange, but through OTC in a form that does not affect the market.

Crypto KOL MartyParty believes that FTX assets will not enter the open market and will not be traded through the exchange’s order book and will not affect the market. Cryptocurrency analyst Lark Davis also said that the tokens held by FTX will not be sold on the market, and most will be through OTC. The volumes for BTC and ETH are large, but selling pressure that the market can absorb. Aptos is probably the only one worth worrying about, but that would only trigger a big selloff if all Aptos sold off at once. But that won’t happen because FTX creditors want to extract maximum value from these tokens.

But the market is still worried about the possible adverse effects. Crypto analysis agency IntoTheBlock highlighted that bullish news for ETH and SOL appears to be overshadowed by fear-driven market dynamics. Although the market exists with Visa* (Visa is extending its stablecoin settlement capabilities to the Solana blockchain and working with merchant acquirers Worldpay and Nuvei)* and Ethereum spot ETFs possible Positive news about the approval, but FTX’s impending $3.4 billion liquidation could determine market trends.

FTX is accelerating recovery measures

Recently, in addition to selling tokens, FTX has been constantly seeking ways to recover assets amid financial difficulties and has adopted a series of legal measures.

On September 10, FTX filed a recovery lawsuit against the full-chain interoperability platform LayerZero, hoping to recover US$21 million. In addition, legal proceedings were also filed against Ari Litan, chief operating officer of LayerZero, demanding a payment of US$13 million, and US$6.5 million was sought from Litan’s Skip & Goose company.

Additionally, FTX is reconsidering clawing back promotional fees paid to sports personalities. On September 11, a court document filed by FTX’s current management in bankruptcy court disclosed a detailed list of celebrities, businesses and sports teams that have promoted the exchange over the years. Among them, FTX paid nearly US$750,000 to former NBA star Shaquille O’Neal, approximately US$308,000 to Naomi Osaka, nearly US$206,000 to American football player Rafer Lawrence, and nearly US$206,000 to baseball star David ·Ortiz paid approximately $271,000.

FTX acknowledges that the list itself may not reflect an exhaustive list of all deposits and repayments, but is working to identify all outstanding payments from previous years to understand how much of them can be recovered to repay the debt. It’s unclear if all of the money is recoverable or if any athletes or teams have offered to have their money returned.