Cryptocurrencies slumped on Monday as investors were startled by the potential selling pressure that could soon emanate from the now-defunct digital asset exchange FTX.
Bitcoin and other majors might take an even deeper hit in the near term if FTX receives regulatory approval to liquidate its $3.4 billion stash of crypto assets to repay creditors and lower volatility risks.
FTX Crypto Dump
Delaware Bankruptcy Court officers are on September 13 set to decide on allowing a $3.4 billion crypto asset sale request submitted by FXT’s legal team.
Initially made in late August, the submission would tap Mike Novogratz’s Galaxy Digital as an advisor to help with the sales. As per the proposed plan, the bankrupt crypto exchange would be permitted to liquidate a maximum of $100 million worth of cryptos each week. This limit could potentially be raised to $200 million on an individual token basis.
According to a recent court filing, roughly $2.6 billion in cash has been secured by FTX in addition to the $1.1 billion it held when it filed for Chapter 11 bankruptcy in November 2022. FTX also holds $3.4 billion in cryptocurrencies. The company also owns 38 properties in the Bahamas, with an estimated value of $222 million.
Cryptocurrencies Poised For Major FTX-Fuelled Pullback?
Bitcoin suffered a 2.9% loss on Sept. 11, briefly sinking below the $25,000 level as market participants were pondering the possibility of FTX securing the approval.
Ethereum, the second largest cryptocurrency by market cap, retraced by 4.6% over the past 24 hours. Ripple’s XRP was the worst hit by the sell-off on Monday, plummeting 5.7%, CoinGecko data showed.
Solana (SOL) also shed 3.8% of its value during the same timeframe and traded for $17.49 at publication time. It’s worth mentioning that FTX holds nearly $1.2 billion worth of SOL. That’s almost 16% of its outstanding supply.
The filing shows that FTX’s $3.4 billion cryptocurrency holdings also hold $560 million in BTC and $192 million in ether. Once approved, the impending sell-off could create downward price pressure as freshly liquidated cryptocurrency floods the crypto market.
Some members of the Crypto Twitter community expressed their concerns about the idea that liquidators may soon unleash billions on the market. “SOL is going to dump hard after FTX sells its bag, going to reach 14$ soon,” opined one X user.