News - Here's what happens when FTX sells its cryptos

By Mike Hesp

Here's what happens when FTX sells its cryptos

On Sept. 13, FTX may get approval to sell $3.5 billion worth of cryptos. Here's what you need to know.

The forgotten ghosts of 2022 have recently reawakened and are apparently already haunting the crypto market. This can be seen in the current price weakness in recent days. One name is increasingly reverberating through social media: FTX. As court documents from August indicate, Sam Bankman-Fried's toppled exchange is expected to receive court approval on Sept. 13 to liquidate its rescued crypto stocks. And those are still substantial. FTX and sister company Alameda Research reportedly have crypto stocks worth more than $4.3 billion.

The rumor of the impending sale promptly caused price drops in the altcoin market, led by Solana. According to the latest information, trustees had already begun the moving the first SOL holdings. The broader sector followed former darling Sam Bankman-Fried, after which some coins and tokens hit new lows. So even before the alleged liquidation of FTX shares, the market is already stumbling. How bad can it get for altcoins? And which cryptocurrencies are even part of the bankrupt exchange's portfolio?

These are the cryptocurrencies that FTX has

The influence of Sam Bankman-Fried and Alameda Research in the crypto sector reached far and wide. Over the course of their existence, FTX and co. acquired large stakes in various tokens. They also secured claims to later payouts from cryptocurrencies that were still locked (vesting). According to the curator Kroll have saved about $4.3 billion in crypto currencies. Several more have been added since the data was published in January.

The holdings include about US$245 million in stablecoins, as well as US$268 million in BTC, US$90 million in ETH and further amounts of tens of millions from the altcoins APT, DOGE and MATIC. In addition, the companies own large amounts of smaller tokens with a total value of more than a billion US dollars, mainly with third parties and other crypto exchanges. Just over US$2 billion worth of smaller altcoins, some of which are on the Solana blockchain, are illiquid and cannot be sold. Given their high liquid holdings, however, the crypto community is wondering what will happen when they come to market.

The total value of FTX assets is, of course, subject to the fluctuations of cryptocurrencies. To repay creditors of the insolvent exchange as much as possible, the trustees will want to sell quickly, it is believed. The market now seems to be pricing in this potential selling pressure. The prices of APT, MATIC and XRP reacted with sharp declines compared to a week ago. Solana in particular posted the heaviest losses so far, as FTX and Co. hold particularly large SOL stocks.

Downward slide for the altcoin market?

A previous analysis of Solana showed that actual liquid holdings should be significantly lower. According to this analysis, many of the SOL tokens will only become accessible to FTX over the next few years and are unsaleable for the time being. The quantities of BTC, ETH and co. should also theoretically be able to be absorbed by the market without suffering huge price losses. Especially since the cryptos are unlikely to be sold overnight. Court documents show that Galaxy Digital, Mike Novogratz's company, will be commissioned to sell the cryptos. FTX's plan, thus submitted for approval, provides for the liquidation of cryptos worth between US$100 million and up to US$200 million per week.

Moreover, the sale is likely to take place "Over The Counter" (OTC), that is, directly between the respective parties. This is intended to limit the impact on the market and ensure the most stable sale price possible. Galaxy also plans to deploy some of the coins and tokens in DeFi projects to generate passive income and increase subsequent payouts. This reduces cash holdings, at least in the short term. Thus, the super-GAU predicted by many would be somewhat put into perspective based on these findings.

The FTX sales may be nothing more than FUD (Fear, Uncertainty, Doubt). But this has been plaguing the crypto sector more and more lately. So the mere prospect of continued FTX selling pressure is causing additional panic among many investors. This fear could lead to further price declines in the coming weeks, as is already evident. Weak macroeconomic data, declining liquidity and the historical negative balance of crypto in September continue to point to turbulent weeks for the sector. So it seems that investors will once again need strong nerves.

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