Fri. Sep 22nd, 2023
    The Sale of Tokens by Bankrupt Crypto Exchange FTX: Market Impact Mitigated

    In a research report, Coinbase states that the sale of tokens held by bankrupt crypto exchange FTX will not have a significant impact on the market due to several mitigating factors. Firstly, the liquidation of tokens is limited to $50 million per week in the initial phase and will gradually increase to $100 million per week in subsequent weeks. However, any permanent increase to a maximum of $200 million per week would require approval from committees representing FTX debtors.

    According to a court filing, FTX currently holds approximately $1.16 billion in solana (SOL), $560 million in bitcoin (BTC), $192 million in ether (ETH), and an additional $1.49 billion in other tokens. The court ruling last week allows FTX to sell and invest these holdings to repay its creditors.

    To ensure controlled selling of certain tokens affiliated with insiders, strict controls have been put in place. These controls require a 10-day advance notice to the committees overseeing the process. It is also worth noting that a significant portion of FTX’s solana holdings are locked up until 2025 as part of the token’s vesting schedule, along with other tokens that need to be sold.

    Furthermore, once committee approval is obtained, FTX will have the ability to hedge its sales of bitcoin, ether, and other tokens through an investment adviser.

    In conclusion, the sale of tokens by FTX during its bankruptcy will be implemented in a controlled manner, with limitations and oversight in place to prevent any unwanted market shocks.

    Sources: Coinbase Research Report, Court Filing by FTX.