34 billion selling pressure? If FTX is approved for clearing tokens, what impact will it have on the market?

Author: Felix, PANews

One of the most concerning events in the market this week is the court hearing regarding 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 initiate sales, pledging, and hedging of its large amount of cryptocurrency assets. FTX aims to return funds to creditors in fiat currency rather than Bitcoin or Ethereum. As of April this year, FTX holds $3.4 billion worth of cryptocurrency, and if the hearing is approved, it will result in significant selling pressure. Therefore, since last week, it has attracted widespread market attention and triggered FUD sentiment.

This matter is still inconclusive. 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 obtains approval on September 13th, the liquidation may not start immediately in its entirety. It may be carried out in weekly batches, and preparations for the sale may have already been made as FTX's wallet has been transferring funds consistently.

Impact on Shitcoins

The possibility of FTX's sell-off has raised concerns in the market, especially for the shitcoins owned by FTX. Records show that Solana is the largest portion of its assets, with a value of approximately $685 million.

This uncertainty has caused panic among SOL investors. As of 12:00 PM on September 11th (Beijing time), SOL has experienced a 4.6% price drop in the past 24 hours and is currently hovering around $18.36. This downturn stands in stark contrast to most other tokens, which have either maintained their original prices or experienced minor declines.

In addition, the exchange's native token FTT accounts for $529 million of the assets to be liquidated. The limited liquidity and market depth of FTT have raised doubts about FTX's liquidation strategy.

FTX's portfolio also includes a large number of other cryptocurrencies, such as Aptos, Dogecoin, Polygon's MATIC, and XRP.

Market Opinions Differ

Panic may be premature. In fact, FTX is concerned that a one-time sell-off could cause a price crash, leading to a devaluation of its over 3 billion USD worth of cryptocurrencies. Therefore, according to its submitted document, the sell-off limit is 100 million USD tokens per week, with a maximum limit of 200 million USD per week.

In addition, industry insiders generally believe that the sell-off will not be done through exchanges, but rather through OTC in a way that does not affect the market.

Crypto KOL MartyParty believes that FTX assets will not enter the public market and that trading will not be done through exchange order books, thus not impacting the market. Cryptocurrency analyst Lark Davis also states that most of the tokens held by FTX will not be sold internally and will be done mostly through OTC. While there is a large amount of BTC and ETH, the market can absorb the selling pressure. Aptos may be the only concern, but a significant drop will only occur if all Aptos are sold at once. However, this will not happen as FTX creditors want to extract the maximum value from these tokens.

However, the market is still concerned about the potential adverse impact. Crypto analytics firm IntoTheBlock emphasizes that the bullish news of ETH and SOL seems to have been overshadowed by market dynamics driven by fear. Despite the positive news of Visa (Visa is expanding its stablecoin settlement functionality to the Solana blockchain and collaborating with merchant acquirers Worldpay and Nuvei) and the possible approval of Ethereum spot ETF, the upcoming 3.4 billion USD liquidation by FTX may determine market trends.

FTX is Accelerating its Recovery Measures

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

On September 10th, FTX filed a recovery lawsuit against the interoperable platform LayerZero, hoping to recover $21 million. In addition, a legal lawsuit was filed against Ari Litan, the Chief Operating Officer of LayerZero, demanding a payment of $13 million, as well as a recovery of $6.5 million from Litan's company, Skip & Goose.

Furthermore, FTX is reconsidering the recovery of promotion fees paid to sports celebrities. On September 11th, the current management of FTX disclosed a detailed list of celebrities, companies, and sports teams that have been promoted by the exchange in a court document submitted to the bankruptcy court. Among them, FTX paid nearly $750,000 to former NBA star Shaquille O'Neal, about $308,000 to Naomi Osaka, nearly $206,000 to NFL 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 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 a return of funds.