FTX exchange’s $3.6 billion crypto liquidation unlikely to cause bloodbath in Solana, Ethereum, Aptos prices
- FTX received the greenlight to liquidate $3.6 billion in crypto assets from a US bankruptcy court in Delaware.
- Solana, Ethereum and Aptos are the top three altcoin holdings of the bankrupt FTX exchange.
- A bloodbath in altcoins is less likely as the liquidation process will be initiated with blocks of $50 million weekly and escalate to $100 million.
FTX exchange received the US bankruptcy court’s nod to shed $3.6 billion in crypto holdings in exchange for fiat. Following the court’s decision, the estate will loop in Galaxy Digital, a crypto asset management firm, to oversee the sale of the assets.
FTX’s crypto liquidation plan has evoked bearish sentiment among investors on X. Jeff Dorman, CIO of investment firm Arca, counters the narrative and explains that Galaxy Digital is likely to sell the assets via Over-The-Counter (OTC) deals, while exchange-based selling is unlikely.
Also read: XRP price recovery likely to be fueled by buying pressure from Ripple holders on exchanges
FTX prepares to liquidate crypto holdings with Galaxy Digital
Following the US bankruptcy court’s nod to allow FTX’s liquidation of $3.6 billion in crypto, market participants anticipated a decline in asset prices. The knee-jerk reaction was a price drop in Solana. Find out more about it here.
The top 10 crypto holdings of FTX are:
1. Solana (SOL)- $1.16 billion
2. Bitcoin (BTC)- $560 million
3. Ethereum (ETH)- $192 million
4. Aptos (APT) - $137 million
5. USD Tether (USDT) - $120 million
6. XRP- $119 million
7. BitDAO (BIT) - $49 million
8. Stargate Finance (STG) - $46 million
9. Wrapped Bitcoin (WBTC) - $41 million
10. Wrapped Ethereum (WETH) - $37 million
FTX’s top three altcoin holdings are Solana, Ethereum and Aptos. While holders of these tokens are concerned about a future sell-off in these assets, driven by FTX’s court-ordered sales, that is a less likely scenario.
Galaxy Digital, led by Mike Novogratz, will oversee the sale of the crypto assets. Contrary to popular opinion, these tokens are less likely to hit cryptocurrency exchanges and increase selling pressure on the assets. Instead, according to Jeff Dorman, institutions are likely to acquire the crypto holdings through OTC deals.
Been tweeting / replying a lot today about the FTX court approved sale of crypto assets, so if you missed key points, here's a summary with a few updates:
— Jeff Dorman, CFA (@jdorman81) September 13, 2023
1) Galaxy Asset Mgmt, not their trading desk, won the bid. They must act as a fiduciary & sell gradually & opportunistically https://t.co/O336JAVzU1
Galaxy is under no obligation to sell $100 million in crypto holdings every week, and there is a likelihood of receiving court approval for larger block bids in OTC sales.
Dorman believes this activity will retain a focus on maximizing gains for the bankrupt estate, not on getting rid of the assets within a short period of time. This makes it clear that a sudden spike in selling pressure on assets across centralized exchanges is likely not in the best interest of the estate.
Bitcoin, altcoins, stablecoins FAQs
What is Bitcoin?
Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any one person, group, or entity, which eliminates the need for third-party participation during financial transactions.
What are altcoins?
Altcoins are any cryptocurrency apart from Bitcoin, but some also regard Ethereum as a non-altcoin because it is from these two cryptocurrencies that forking happens. If this is true, then Litecoin is the first altcoin, forked from the Bitcoin protocol and, therefore, an “improved” version of it.
What are stablecoins?
Stablecoins are cryptocurrencies designed to have a stable price, with their value backed by a reserve of the asset it represents. To achieve this, the value of any one stablecoin is pegged to a commodity or financial instrument, such as the US Dollar (USD), with its supply regulated by an algorithm or demand. The main goal of stablecoins is to provide an on/off-ramp for investors willing to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value since cryptocurrencies, in general, are subject to volatility.
What is Bitcoin Dominance?
Bitcoin dominance is the ratio of Bitcoin's market capitalization to the total market capitalization of all cryptocurrencies combined. It provides a clear picture of Bitcoin’s interest among investors. A high BTC dominance typically happens before and during a bull run, in which investors resort to investing in relatively stable and high market capitalization cryptocurrency like Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in a quest for higher returns, which usually triggers an explosion of altcoin rallies.
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Author
Ekta Mourya
FXStreet
Ekta Mourya has extensive experience in fundamental and on-chain analysis, particularly focused on impact of macroeconomics and central bank policies on cryptocurrencies.
