Coinbase Report: FTX Token Liquidation Will Not Affect The Market
Coinbase's latest report shows that the liquidation of FTX tokens will not affect the market. Coinbase prepared the report amid market participants' concerns about the upcoming sell-off of the bankrupt exchange's assets.
As previously reported, the court ordered FTX to begin liquidating $3.4 billion in user assets. These funds are spread across several crypto assets, including Bitcoin, ETH, Solana and other altcoins. A massive sell-off of these tokens could potentially put pressure on the markets and crash prices. However, Coinbase makes a case for why this won't happen.
One of the main reasons why the liquidation will not put pressure on the price is the volume limits that have been set at each stage of the sale. Volume is capped at $50 million in the first few weeks and $100 million in subsequent weeks. Strict rules on insider token sales and approval for the $200 million liquidation are also good reasons.
Some steps are controlled and approved by creditors. For example, FTX is allowed to enter into contracts to hedge digital assets, but they are limited to Bitcoin and ETH, and creditors' approval is required to switch to other assets.
Additionally, the Coinbase report reassured Solana investors by highlighting the fact that the majority of FTX's holdings in Solana will remain locked in until 2025.
5/ The FTX estate also holds more than 1,300 “Category B” tokens that are illiquid and/or controlled by the estate. The three largest Category B holdings are SRM, MAPS, and OXY.
— Coinbase Institutional 🛡️ (@CoinbaseInsto) September 12, 2023
Overall, these factors are intended to mitigate the impact on the market.
Brian Armstrong Sam Bankman-Fried Coinbase Exchange
