Recent reports of a potential FTX liquidation have caused a wave of anxiety in the cryptocurrency community. Tension and uncertainty are growing as the specter of declines faces many cryptocurrencies, including Bitcoin.
Liquidations to pay creditors
New concerns have arisen after it was revealed that FTX’s roughly $7 billion in holdings includes liquid crypto assets worth about $1.3 billion (not including stablecoins). Of particular note is the fact that the FTX’s largest resource is SOL tokens, worth $1.2 billion. In addition, the FTX maintains a Bitcoin stock worth about $560 million and Ethereum worth $192 million. In addition, the exchange also holds about $20-30 million in APT, DOGE, TRX and MATIC.
The report also revealed that FTX owns 38 properties in the Bahamas with a total value of about $199 million. Although the exchange has already secured $2.6 billion in cash (after last November’s crisis), it recently applied to the court for permission to sell its recovered cryptocurrency assets to repay creditors.
It’s worth noting that it’s not only the value of these crypto assets that is causing concern in the market, but also their proportion to real turnover.
Nonetheless, according to analysts at Messari, the potential sale of FTX’s Bitcoin holdings represents only 1% of the asset’s weekly trading volume, which is unlikely to significantly affect the markets. They argue that demand is currently sufficient to absorb most of the potential selling pressure. This is also expected to apply to Ethereum.
Moreover, SOL tokens are expected to be released once a month, and the cyclical value of these sales is expected to be only $9.2 million. Analysts at Messari say that such a situation “significantly reduces the impact of liquidation and places it more within the limits of the ability to manage BTC and ETH sales.”
However, the situation becomes riskier when looking at DOGE, TRX and MATIC, which show lower liquidity. The company estimates that $20-30 million in these tokens account for a significant 6-12% of their weekly trading volume, making them more vulnerable to market influences.
FTX acquisition a recipe for problems for many cryptocurrencies
Nevertheless, there is still hope for a potential FTX rebound through a strategic takeover, as suggested by the court proposal. There has been constant speculation on this aspect since May. There are 75 potential bidders showing interest in it. The court motion indicates that these bids are being carefully scrutinized, and the timing of a potential deal depends on various factors, including the willingness of the companies involved.