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

One of the things that the market is most concerned about this week is that FTX will hold a court hearing on its token sale application on September 13. According to the court documents filed by FTX on August 23, FTX hopes to start selling, pledging and hedging its large number of cryptocurrency assets. FTX hopes to return 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 cryptocurrency, and if the hearing is passed, it will mean huge selling pressure. Therefore, it has attracted widespread attention from the market since last week, and FUD sentiment is everywhere.

The matter has not yet been finalized. On the one hand, the FTX token sale application will be heard by the Delaware Bankruptcy Court at 1 pm EST on September 13, and it is still unknown whether the court will approve it. Even if FTX is approved on September 13, the liquidation may not be carried out all at once, but will be sold in batches every week. Perhaps in preparation for the sale, FTX's wallet has been transferred last week.

Altcoins affected

FTX’s potential sell-off has sparked market concerns, especially regarding the altcoins it owns. Records show that Solana is the largest portion of its assets, worth about $685 million.

This uncertainty has caused panic among SOL investors. As of 12:00 on September 11 (Beijing time), SOL's price has fallen 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 basically maintained their original prices or have fallen slightly.

In addition, the exchange’s proprietary token, FTT, accounted for $529 million of assets to be liquidated. The limited liquidity and market depth of FTT 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 views are mixed

Panic may be premature. In fact, FTX is worried that a one-time sale could cause a price crash, wiping out the value of its more than $3 billion in cryptocurrency holdings. Therefore, according to its filing, 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 sale will not be conducted through an 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, which 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 of them will be sold in the form of OTC. The amount of BTC and ETH is large, but it is a selling pressure that the market can absorb. Aptos may be the only one to worry about, but it will only cause a big drop if all Aptos are sold at once. But this will not happen because FTX creditors want to get the maximum value from these tokens.

But the market is still worried about the possible adverse effects. Crypto analysis agency IntoTheBlock emphasized that the bullish news for ETH and SOL seems to be overshadowed by fear-driven market dynamics. Although there is positive news in the market with Visa (Visa is expanding its stablecoin settlement function to the Solana blockchain and working with merchant acquirers Worldpay and Nuvei) and the possible approval of the Ethereum spot ETF, the upcoming $3.4 billion liquidation of FTX may determine the market trend.

FTX is accelerating recovery measures

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

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

In addition, FTX is reconsidering recovering the promotion fees paid to sports celebrities. On September 11, a court document filed by the current management of FTX to the bankruptcy court disclosed a detailed list of celebrities, companies and sports teams that have promoted the exchange over the years. Among them, FTX paid nearly $750,000 to former NBA star Shaquille O'Neal, about $308,000 to Naomi Osaka, nearly $206,000 to American football player Leifer Lawrence, and about $271,000 to baseball star David Ortiz.

FTX acknowledged 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 see how much of that can be collected to repay debts. It is not clear whether all the money can be recovered or whether any athletes or teams have already offered to return the money.