In a recent development, FTX, a prominent cryptocurrency exchange, has been granted permission to liquidate its vast digital asset holdings, amounting to approximately $3.4 billion. This decision comes as the exchange seeks to repay its creditors following its bankruptcy.
FTX, founded by the now-jailed CEO Sam Bankman-Fried, currently holds assets worth roughly $7 billion. This includes an estimated $3.4 billion in various cryptocurrency holdings, such as bitcoin BTC 0.27%, ethereum ETH 0.85%, solana SOL -1.27%, and XRP XRP 0.65%. The liquidation of these substantial crypto assets has raised concerns among retail crypto investors about the potential impact on token prices and the overall cryptocurrency market.
Earlier this week, it was revealed during bankruptcy proceedings that FTX possesses assets worth about $7 billion. This includes significant crypto holdings and real estate properties located in the Bahamas. The next likely step is the liquidation of these assets to repay the exchange’s creditors.
One of the significant concerns is the potential impact of large token sales, often referred to as “dumps,” on the still-maturing cryptocurrency market. For instance, FTX reportedly holds about 16% of the circulating supply of solana’s SOL token, valued at $1.16 billion. Additionally, the exchange has holdings of $560 million in bitcoin, $192 million in ethereum, $120 million in tether’s USDT, and $119 million in Ripple’s XRP. The sale of these assets, especially in large quantities, could potentially influence their market prices.
To mitigate potential market disruptions, the court has outlined a structured liquidation process. During the initial week, FTX is permitted to sell digital assets up to a limit of $50 million. In the subsequent weeks, this limit will be increased to $100 million, but only with the necessary permissions. Furthermore, FTX is required to provide bi-weekly and monthly reports detailing any sales processed or intended, including the type of token, the quantity, and respective staking yields or rewards.
Another noteworthy aspect of the liquidation plan is the appointment of Galaxy Digital, led by Mike Novogratz, as FTX’s investment manager. Galaxy Digital will assist in the process of selling off the company’s remaining crypto assets. The court has also clarified that both the bankruptcy court and the appointed investment manager reserve the right to object to any sales intended by FTX, provided the objection is in writing.
