FTX's Epic $3.4 Billion Crypto Liquidation - What It Means for Your Wallet?
As the court process following FTX's bankruptcy continues, the market awaits liquidation of over $3.4 Billion in remaining crypto assets. Altcoins brace for expected sell-offs.
The Crypto world has been suspiciously quiet lately. Luckily, FTX comes into the public space once again to entertain us with its court process. This time the master plan of FTX is to liquidate the remaining digital assets in order to offset its financial problems.
As FTX plans to unload a king's ransom in cryptocurrency assets, many investors are left wondering: How will this affect the market, and more importantly, their portfolios? This article dives into the saga, offering insights, implications, and what you might expect in the coming days.
TL;DR:
- The once-dominant crypto exchange FTX is set to liquidate a whopping $3.4 billion in digital assets, following its bankruptcy fallout.
- A large portion of FTX's remaining assets consists of $SOL, $FTT, and $BTC. Lower-cap assets might be especially affected with potential broader implications.
- If the court approves of the liquidation FTX intends to sell up to $100 million in tokens weekly, but caps could be raised to $200 million for individual assets.
- FTX is taking legal routes to recover additional funds, even from sports celebrities and companies who once cooperated with them.
What is Happening with FTX?
FTX, once a titan in the cryptocurrency exchange realm, stumbled into bankruptcy in November 2022. Fast-forwarding to now, this exchange is knocking on the doors of the Delaware Bankruptcy Court. The mission? To secure approval for liquidating a staggering $3.4 billion in cryptocurrencies.
Big selling pressure is potentially coming next week🚨
— The DeFi Investor 🔎 (@TheDeFinvestor) September 9, 2023
FTX will likely get approval to liquidate its assets on Sept. 13.
FTX had $3.4B in crypto in April. The proposed plan is to sell assets worth up to $200M per week. pic.twitter.com/4aHnhOVKP1
As they stand on the cusp of this monumental decision, FTX has proposed a strategy: gradually offloading their crypto stash, selling up to $100 million worth of tokens weekly, with the flexibility to ramp it up to $200 million on certain occasions. This measured approach aims to prevent market disturbance.
Related: The Crypto Market Shake-up of 2022: Unpacking the FTX Fiasco
Gradual release of liquidated assets
Instead of flooding the market with a sudden deluge of cryptocurrencies, FTX's plan focuses on a drip-feed approach. By selling off their assets incrementally, the exchange hopes to sidestep massive market disruption and potentially retain more value from the assets.
Despite this, market experts and traders maintain a cautious stance, knowing that even this controlled release could influence cryptocurrency prices. Market psychology is a major influence in situations like this, which means that the sell-offs might be already priced in.
The Case for Altcoins
The looming FTX liquidation could particularly rattle the altcoin market. Among the assets poised for liquidation, Solana (SOL) holds a dominant position, valued at approximately $685 million. Already, SOL has felt the weight of this uncertainty, as its price declined significantly, even amid bullish news like Visa's adoption of the altcoin for stablecoin capabilities.
Moreover, FTX's native token, FTT, with a value standing at $529 million, poses questions on the exchange’s liquidation strategy given its limited liquidity. Other tokens in the FTX portfolio, including Ethereum, Dogecoin, and MATIC, also face speculative futures.
FTX Retrieving Funds - Lawsuits Against Celebrities
FTX isn't retreating quietly. The exchange is launching an array of legal offensives, targeting entities and personalities that previously aligned with its brand. LayerZero and its Chief Operating Officer, Ari Litan, find themselves at the crosshairs, with FTX gunning to retrieve tens of millions.
Additionally, sports icons like Naomi Osaka and Shaquille O’Neal, who once celebrated lucrative promotional deals with FTX, might now have to grapple with legal entanglements. The aim is clear: recover as much capital as possible.
The Overall Market Outlook
With the D-day of September 13th fast approaching, the cryptocurrency market is shrouded in anticipation and speculation. Though FTX's liquidation strategy seeks to cushion the market blow, concerns remain. Major cryptocurrencies like Ethereum have already felt the tremors, experiencing price dips despite favorable market news.
The shadow of FTX's decision looms large, threatening to eclipse positive developments for many cryptocurrencies. As stakeholders and investors watch with bated breath, the coming days promise significant market revelations.
