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- Despite the court’s nod to liquidate digital assets, FTX has a capping on liquidations at a given time.
- Analysts explain that any further sell-off in Solana is unlikely beyond the major correction that happened this week.
On Wednesday, September 13, the Delaware Bankruptcy Court approved the sale of FTX digital assets. Crypto exchange FTX holds more than $3.4 billion with a majority of its holdings in Solana (SOL).
The bankruptcy crypto exchanges more than $1.16 billion worth of Solana (SOL) in its crypto holdings. As a result, the news of FTX creditor liquidation sent Solana into a major correction earlier this week with the SOL price tanking all the way to a low of $17.31.
Crypto exchange FTX used Solana (SOL) as a major reserve currency before its bankruptcy last year in November 2022. However, the exchange sold Solana in massive quantities during the crash of the FTT tokens leading to massive liquidations. A similar fear engulfed the market earlier this week.
But in a surprise move, Solana has given a major upside reversal gaining by more than 5% in the last 24 hours. As of press time, SOL is trading at $18.68 with a market cap of $7.6 billion.
Why Solana Sell-Off won’t Happen Further
Market analysts believe that there may not be any further sell-off in Solana going ahead. Popular crypto analyst Michael van de Poppe explained that FTX has the ability to liquidate up to $200 million worth of assets on a weekly basis for their respective clients, potentially mitigating their liabilities.
This move could introduce additional selling pressure into the markets, although it’s likely that this possibility has already been factored into current market prices.
Notably, we might have expected a significant sell-off in Solana; however, it’s worth noting that a substantial portion of Solana assets, specifically 7 million $SOL, have limited availability for sale. Moreover, a significant volume of these assets has already been sold. This situation may potentially result in a market dynamic reminiscent of “selling the rumor and buying the news.”
Initially, there will be a cap of $50 million for the first week, which can subsequently be raised to $100 million in the following weeks. However, there exists an option to further elevate this limit, subject to obtaining prior written consent from both the creditors’ committee and the ad hoc committee, or ultimately, securing approval from the court to extend it to $200 million on a weekly basis.
FTX Allowed To Sell Crypto Holdings
FTX will have the authorization to execute the sale of digital assets in weekly batches, excluding Bitcoin (BTC), which is currently valued at $26,259, Ether (ETH) at $1,618, and specific tokens affiliated with insiders. These sales will be managed through an investment adviser following established guidelines.
However, the sale of Bitcoin, Ether, and insider-affiliated tokens can proceed through a separate decision by FTX, subject to providing a 10-day notice to both the committees and the U.S. trustee, who is designated by the United States Department of Justice.
These sales will also be facilitated by an investment adviser. Details regarding these sales will remain confidential, accessible only to professionals, with a redacted version available to the public. In case of written objections from the committees or the U.S. trustee, the sales will be postponed until the objections are resolved or the court mandates the sale.
