Coinbase’s report suggests that FTX’s massive token liquidation, while substantial, is unlikely to have a major impact on the cryptocurrency market.
- A recent report by Coinbase suggests that the mass token liquidation by the bankrupt FTX is unlikely to cause significant market shocks.
- With approval to liquidate $7.3 billion in assets, FTX is under strict regulatory guidelines to ensure minimal market disruption.
- The analysis by Coinbase highlights sell limits, restrictions, and vesting schedules as factors mitigating potential shocks.
Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware recently approved FTX’s request to liquidate $3.4 billion worth of cryptocurrency assets. These include significant holdings in Solana (SOL), bitcoin (BTC), ether (ETH), and Aptos (APT). The total value of assets to be liquidated, including other forms of assets and cash, amounts to $7.3 billion.
Headline 💡Coinbase report: FTX Crypto Asset Sales Will Not Crash The Market 🩸 Due to Volume Limit Regulated In Each Liquidation Phase#coinbase#FTX#Cryptoinvesting #Crypto #cryptocurrencies #cryptocurrency pic.twitter.com/q8T5Z6wKIY
— LIGHT ┃ NEWS (@LIGHTCRYPT01) September 18, 2023
Stakeholders in Agreement
Both the official creditors’ committee and the ad hoc committee of non-US customers supported the liquidation, aiming to minimize risks and maximize value for FTX’s users.
Despite an initial uptick in trading volumes for BTC and ETH by 37%, the cryptocurrency market quickly stabilized. Coinbase’s weekly market report suggests several reasons for the subdued impact.
Controlled Liquidation
FTX will adhere to weekly sell limits initially set at $50 million across crypto assets. These limits will gradually increase to $100 million and eventually $200 million, thus preventing an abrupt market dump.
FTX is also mandated to provide ten days of advanced notice before liquidating any insider-affiliated tokens, ensuring no sudden market shocks from such sales.
A substantial portion of FTX’s SOL holdings and some other tokens will remain locked until 2025 due to their vesting schedules, further limiting the immediate availability of these assets on the market.
To Sum it All Up…..
Based on Coinbase’s analysis, the planned mass token liquidation by FTX is unlikely to cause significant disruptions in the cryptocurrency market. Sell limits, advanced notices, and vesting schedules all act as safeguards against potential market shocks. Nevertheless, market participants and analysts will be keeping a keen eye on the situation as it unfolds.
