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

Compiled by: Felix, LianGuaiNews

One of the most concerning events in the market this week is the court hearing on token sales application by FTX, which will take place on September 13th. According to the court documents submitted by FTX on August 23rd, FTX hopes to start selling, staking, and hedging its large amount of cryptocurrency assets. FTX intends to return the funds to creditors in the form of fiat currency rather than Bitcoin or Ethereum. As of April this year, FTX held $3.4 billion worth of cryptocurrencies, so if the hearing is approved, it would mean a massive sell-off. Therefore, it has attracted widespread attention in the market since last week and has caused FUD sentiment.

This matter is still undecided. On the one hand, FTX’s token sales application will be reviewed by the Delaware Bankruptcy Court at 1:00 PM Eastern Time on September 13th, and it is unknown whether the court will approve it. Even if FTX is approved on September 13th, the liquidation may not start immediately in one go. It may be sold in batches on a weekly basis, and preparations for the sale may have been made last week as FTX’s wallet has been transferring funds. (Related reading: FTX Wallet Transfers Millions of Dollars Worth of Tokens, Will the Sell-off Begin?)

Impact on Altcoins

FTX’s potential sell-off has caused market concerns, especially for the altcoins owned by FTX. Records show that Solana is the largest part of its assets, with a value of approximately $685 million.

This uncertainty has triggered panic among SOL investors. As of 12:00 PM on September 11th (Beijing time), SOL has dropped 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 either maintained their original prices or experienced slight declines.

In addition, FTT, the exchange’s proprietary token, accounts for $529 million of the assets to be liquidated. The limited liquidity and market depth of FTT have raised 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, etc.

Different Market Views

Panic may be premature. In fact, FTX is concerned that a one-time sell-off will cause a price crash and devalue its holdings of over $3 billion worth of cryptocurrencies. Therefore, according to the documents it submitted, the sell-off 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 sell-off will not be conducted through exchanges, but rather in the form of OTC transactions to avoid affecting the market.

Crypto KOL MartyLianGuairty believes that FTX’s assets will not enter the public market and that the transactions will not take place through the exchange’s order book, so it will not affect the market. Cryptocurrency analyst Lark Davis also stated that the tokens held by FTX will not be sold on the exchange and most of them will be traded through OTC. The quantities of BTC and ETH are large, but the market can absorb the sell-off. 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 because FTX creditors want to extract maximum value from these tokens.

However, the market is still concerned about the potential adverse effects. Cryptocurrency analytics firm IntoTheBlock emphasized that the bullish news of ETH and SOL seems to be overshadowed by market dynamics driven by fear. Despite the positive news of Visa (Visa is expanding its stablecoin settlement capabilities to the Solana blockchain and partnering with merchant acquiring institutions WorldLianGuaiy and Nuvei) and the potential approval of an Ethereum spot ETF, the $3.4 billion liquidation event about to take place on FTX may determine the market trend.

FTX Accelerates Recovery Measures

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

On September 10, FTX filed a recovery lawsuit against the cross-chain interoperability platform LayerZero in an attempt to recover $21 million. In addition, a legal lawsuit was filed against Ari Litan, the CEO of LayerZero, demanding a payment of $13 million and seeking to recover $6.5 million from Litan’s company Skip & Goose.

In addition, FTX is reconsidering the recovery of promotional fees paid to sports celebrities. On September 11, a court document submitted by the current management of FTX to the bankruptcy court disclosed a detailed list of celebrities, companies, and sports teams that have been promoted by the exchange over the years. Among them, FTX paid nearly $750,000 to former NBA star Shaquille O’Neal, about $308,000 to tennis player Naomi Osaka, nearly $206,000 to American football 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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