How much impact will the liquidation of FTX token assets have on the market?

Author: Fu Ruo, Odaily Planet Daily

The events related to FTX have always been a focal point for the market. Recently, the frequent transfer of large assets from FTX-related wallets has raised concerns and panic within the crypto community, suspected to be liquidation.

In fact, on September 14, the court approved the FTX asset liquidation plan: the liquidation limit is set at a maximum of $50 million for the first week, and $100 million for subsequent weeks; however, the liquidation cap can be negotiated with creditors, with a maximum ceiling of $200 million. The liquidation process is also relatively clear; excluding some tokens that need to be unlocked, most of the remaining tokens can be liquidated, among which Bitcoin and Ethereum require a 10-day advance notice to the creditors' committee, special committee, and U.S. trustee before they can be sold.

However, since the approval of the liquidation plan, the relevant wallets of FTX/Alameda have not taken much action, except for depositing some SOL and ETH into Figment for staking, while the remaining holdings have remained unchanged.

In the past two weeks, as the crypto market has risen, FTX/Alameda-related addresses have frequently experienced large movements, transferring multiple cryptocurrencies to exchanges, raising concerns in the market about a potential decline in prices due to the liquidation of FTX assets.

In response to the recent outflow of tokens from FTX/Alameda-related addresses, Odaily Planet Daily has compiled, counted, and analyzed the data.

Token Outflow Statistics from FTX/Alameda Related Addresses

In the past week, FTX/Alameda-related addresses have deposited approximately $128 million in token assets to Binance and Coinbase. The following chart shows the token asset outflow statistics from FTX/Alameda-related addresses over the past week:

From the chart above, it can be seen that the number of different tokens that flowed out in the past 7 days is 28, among which 19 tokens had outflow amounts exceeding $1 million.

The top three tokens by outflow quantity are: SOL with an outflow of approximately 1.26 million coins, valued at about $41 million; RNDR with an outflow of approximately 9.11 million coins, valued at about $22 million; and ETH with an outflow of approximately 8.738 million coins, valued at about $157 million.

(Odaily Planet Daily: The above amounts are calculated based on the market price at the time of deposit, with data sourced from 8 hot wallet addresses and 2 SOL cold wallets of FTX/Alameda.)

FTX Token Asset Liquidation Has Little Impact on SOL

Starting from October 25, FTX/Alameda-related addresses have been successively depositing tokens into exchanges. As the token with the highest outflow value from FTX-related addresses, the price of SOL has not been negatively affected; instead, it has risen against the trend.

(SOL Price Daily Chart)

According to OKX market data, the price of SOL has risen from 30 USDT on October 25 to a peak of 39.8 USDT today, reaching the highest level since September last year, and currently remains around 39 USDT, with an increase of over 20% in the past week.

According to data from CoinGecko, the average trading volume of Solana in the past 7 days has been around $1 billion; the total value of SOL deposited by FTX-related addresses to exchanges was approximately $41 million at that time. Overall, the impact of this liquidation on the highly liquid SOL is not significant.

Other small cryptocurrencies held in FTX wallets with values exceeding one million dollars, such as BICO and AXS, generally have market capitalizations above $100 million, and the pressure from liquidation is also not substantial, with related cryptocurrencies rising alongside the market in the past two weeks.

In essence, the liquidation of FTX token assets aims to maximize benefits, especially since most of FTX's SOL holdings are subject to a structured unlocking plan, and a one-time sale in the short term would not yield greater profits.

According to a previous article by Odaily Planet Daily titled "Dissecting FTX's $3.4 Billion Holdings, How Much Selling Pressure from the Top Ten Tokens?", as of August 31, the holdings of FTX wallet addresses amounted to $3.4 billion; as of today, FTX's total holdings exceed $5 billion—due to the recent market rise, SOL prices have doubled, Bitcoin prices have increased by 30%, and other cryptocurrencies have also seen certain gains.

It is evident that market conditions are crucial for FTX's liquidation; FTX's liquidation team, Galaxy Digital, will not rush to sell and drain market liquidity. Furthermore, as mentioned at the beginning of the article, the court-approved FTX asset liquidation plan has a weekly cap of only $200 million, which will not cause significant fluctuations in current market liquidity. Lastly, the possibility of over-the-counter (OTC) trading for FTX token asset liquidation cannot be ruled out; after the approval of the liquidation plan, news of institutions like DWF frequently purchasing FTX token assets OTC has also started to appear.

Overall, the FTX liquidation team may be more concerned about the impact of liquidation on the market than we are, and the selling pressure caused by liquidation is not as significant as imagined, so the crypto community need not panic excessively.