FTX’s upcoming liquidations unlikely to flood the market, says Coinbase researcher
Despite concerns among some traders, the bankruptcy-related liquidations of cryptocurrency exchange FTX are not expected to cause a market flood. David Duong, head of institutional research at Coinbase, explains in a recent analysis that FTX’s crypto liquidations are subject to weekly sell limits. Initially, the limit is set at $50 million per week, increasing to $100 million per week in subsequent phases.
The court documents reveal that FTX held approximately $1.162 billion worth of Solana (SOL), $560 million worth of Bitcoin (BTC), $192 million worth of Ethereum (ETH), and $1.49 billion worth of other digital assets as of August 31st.
According to Duong, there are strict controls in place for selling „insider-affiliated“ tokens, which require 10 days‘ advance notice to specific committees. Furthermore, Duong highlights that a significant portion of FTX’s Solana holdings will be locked up until 2025 due to the vesting schedule. He also mentions that FTX will be allowed to hedge its crypto sales through an investment advisor if it obtains prior committee approval.
On a broader scale, Duong expects the US Federal Reserve to ease monetary policy in the first or second quarter of 2024, even if it raises interest rates later this year. Duong believes that the current expansionary fiscal policy is sustainably keeping the US economy strong. However, he points out underlying issues such as peaking labor markets, tightening credit conditions, rising loan delinquencies, and the restarting of student loan repayments in October. In this context, he suggests that a dual expansionary fiscal and monetary regime will likely be supportive of Bitcoin as an alternative to the traditional financial system.
Frequently Asked Questions
- Are FTX’s upcoming liquidations likely to cause market flooding?
- No, according to Coinbase’s head of institutional research, the liquidations are subject to weekly sell limits that prevent flooding the market.
- What assets did FTX hold as of August 31st?
- Court documents reveal that FTX held Solana (SOL), Bitcoin (BTC), Ethereum (ETH), and various other digital assets, with a total worth of billions of dollars.
- What controls are in place for selling „insider-affiliated“ tokens?
- Selling such tokens requires 10 days‘ advance notice to specific committees, indicating strict controls to prevent sudden and large-scale sales.
- How long will FTX’s Solana holdings be locked up?
- A significant portion of FTX’s Solana holdings will be locked up until 2025 due to the vesting schedule.
- Will FTX be able to hedge its crypto sales?
- FTX will be allowed to hedge its crypto sales through an investment advisor if it receives prior committee approval.
- What is the market outlook for Bitcoin in relation to the US Federal Reserve’s actions?
- Despite some underlying issues, the Coinbase researcher expects an easing of monetary policy in the first or second quarter of 2024, which should be supportive of Bitcoin as an alternative to the traditional financial system.
Please note that all information provided in this article is based on the given text and has not been independently verified.
