FTX Gears Up To Sell Billions Of Dollars Of Crypto

If the sales are approved, they will undoubtedly be carried out in a careful and controlled manner.

Opinion image: A brain with a Ruby logo

The collapse of FTX, once the second-largest digital asset exchange in the world, rocked the crypto markets. When the organization closed its doors in November last year, it owed customers somewhere in the region of $10 billion. The hotly-anticipated and catastrophic implosion of FTX followed a year-long bear market, and forced the final capitulation for crypto traders.

Bankruptcy Proceedings

The exchange's account-keeping processes were chaotic to the point of barely existing, and it took liquidators months to trawl through its different wallets, bank accounts, and paperwork to untangle its assets and liabilities. Billions of dollars of crypto have since been recovered, and are now controlled by the liquidators.

On Wednesday, a court will make a decision on whether to approve the sale of $3 billion in crypto assets in order to repay FTX's creditors (including customers).

This is a huge step forwards for FTX's former customers. Remember, Mt Gox collapsed almost 10 years ago, and users still have not received any funds. But there are concerns that those billions in crypto will place further pressure on a market that is already in a medium-term downtrend.

Putting Things In Perspective

The Solana community is understandably worried. There's almost $700 million in SOL hanging over the market. However, at $18, SOL is much where it was when FTX halted withdrawals. BTC, meanwhile, is up around 60%. While it's not ideal, fears are overblown, for several reasons.

For starters, only the decision will be made on Wednesday. This does not mean the coins will immediately be market dumped the moment the judge's gavel bangs.

Any sales that occur will almost certainly take place through OTC deals (which do not affect the spot market at all), or over time through market makers, in order to ensure the best possible price. Dumping everything at the same time is a terrible way to get value for money—especially for the more illiquid altcoins.

The relatively small amount of BTC held by FTX would be fairly easily absorbed by the market, in any case, and other highly-liquid cryptos (ETH, XRP) would not experience any difficulties in finding buyers.

Lessons Learned?

As well as organizing the sale of FTX's crypto assets, the liquidators are also exploring the possibility of clawing back payments made to celebrities for their endorsements, including former basketball pro Shaquille O’Neal, who was paid $750,000. A number of celebrities are facing class-action lawsuits for promoting the exchange, and potentially the sale of unregistered securities.

Overall, this is a positive move for the crypto space. Unlike Mt Gox, reparations are being made swiftly. Sam Bankman-Fried is already in jail, and he and other top execs are facing trial. Hard questions are being asked of those who enabled this to happen, including the SEC and Gary Gensler. While elements of the FTX debacle did recall the Mt Gox saga, and suggest that key lessons still had not been learned, we're in a very different place today.

Just don't expect too many takers for that half a billion dollars of FTT tokens.

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