Coinbase predicts that FTX’s cryptocurrency liquidation sales will not cause a market shock
According to the article, the market will not be flooded by the token sales since liquidations are subject to volume constraints.
Coinbase (COIN) claimed in a research paper published Thursday that the sale of tokens held by defunct cryptocurrency exchange FTX will not cause a market shock owing to many mitigating factors.
The article said that the market would not be flooded by the selling of tokens since initial liquidations would be capped at $50 million per week, rising to $100 million in subsequent weeks. Coinbase warns that a permanent rise to $200 million each week requires approval from groups representing FTX debtors.
According to a recent court filing, the cryptocurrency exchange is in possession of about $1.16 billion in solana (SOL), $560 million in bitcoin (BTC), $192 million in ether (ETH), and another $1.49 billion in various tokens. As of last week’s court ruling, it is free to liquidate or invest these assets in order to repay debtors.
There are “strict controls in place for selling certain ‘insider-affiliated’ tokens that require 10 days advance notice to these same committees,” as written by David Duong, the director of institutional research.
In accordance with the token’s vesting timeline, a significant portion of FTX’s solana holdings will remain unsellable until 2025.
Finally, the study notes that after FTX has committee permission, it will be allowed to use an investment advisor to hedge the sales of bitcoin, ether, and other tokens.