The Impact of FTX’s Crypto Sale on the Market: CoinBase Dispels Concerns
FTX Possesses Billions of Dollars in Cryptocurrency
FTX, the bankrupt crypto exchange, has received permission from the court to sell its crypto assets, totaling $3.4 billion. Initially, this news raised concerns about potential market downturn as the large-scale sale could impact the crypto market negatively. However, according to CoinBase, these worries are unfounded.
Selling Limitations for FTX
FTX is subject to weekly selling limitations that currently stand at the disposal of tokens worth $50 million. This limit will eventually increase to $100 million.
The Breakdown of FTX’s Assets
The majority of FTX’s assets comprise Solana (SOL) tokens, with a value of $1.16 billion. Additionally, FTX holds $560 million in Bitcoin (BTC), $192 million in Ethereum (ETH), and $1.46 billion in other altcoins. Notably, the selling limit does not apply to FTX’s Bitcoin and Ethereum holdings.
One reason why the anticipated selling spree may not have a significant market impact is that the majority of FTX’s assets, especially the Solana tokens, are locked up until 2025. This also applies to other types of tokens held by the exchange.
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Dismissing Concerns about a Crypto Dump
Galaxy Digital will be responsible for selling FTX tokens, and the proceeds are expected to be used to repay the exchange’s various creditors.
Last week, when the court’s decision was announced, the Bitcoin price experienced a sharp decline. However, this impulsive drop was completely unwarranted, according to Jeff Dorman of Arca Exchange.
“The way market makers and traders front-run the supply of FTX tokens demonstrates a complete lack of understanding of how a syndicated selling process works. This is a court-approved process that Galaxy Digital will carry out slowly and opportunistically.”
Thus, the initial fear that gripped the crypto market does not seem to have been justified. Despite the initial decline in prices following the news, they have since recovered and are even trading higher than before.
Despite concerns about the impact of FTX’s crypto sale on the market, the limitations on the amount sold each week and the token lockups ensure that any potential negative effects will be mitigated. Galaxy Digital’s responsible handling of the sale process further reassures the market, as it shows a systematic and strategic approach to the asset liquidation.