FTX’s Billion-Dollar Solana Liquidation: Market Crash Or Just Hype?

The potential Solana (SOL) liquidation from failed exchange FTX has become a focal point for traders and crypto investors. The speculation and accompanying FUD (Fear, Uncertainty, Doubt) surrounding the potential sell-off have amplified market uncertainties.

A recent court approval paved the way for the embattled exchange FTX to liquidate $3.4 billion in diverse digital assets. This move, announced by Judge John Dorsey, has set off a whirlwind of debates, especially regarding Solana, one of the assets in FTX’s portfolio.

Among FTX’s vast portfolio, a prominent $1.16 billion is in Solana (SOL). When pitted against FTX’s overall liquid cryptocurrency assets worth $3.4 billion, SOL forms a hefty chunk, over one-third.

FTX’s potential dumping of SOL and its conceivable effect on centralized exchanges has led to increasing debates about its potential price impact on the token. However, crypto analyst MartyParty has ventured into the heart of the discussion, trying to clear the air.

The analyst shed light on FTX’s SOL position in a revealing tweet. Highlighting the intricacies, the analyst stated that many of these holdings, linked to FTX’s sister company Alameda, consist of staked SOL tokens. These, crucially, remain locked until 2025.

This is Alamedas Solana wallet which has the rights to the 26,740,743 staked $SOL from 2025-2028.

This wallets keys will be sold in the FTX liquidation. Not the $SOL which cannot be unlocked until 2025-2028.

As Ive been posting for weeks – FTX/Alameda only hold 7m $SOL and… pic.twitter.com/WeIkCKf2Ek

— MartyParty (@martypartymusic) September 13, 2023

As a result, any immediate liquidation involving these tokens remains off the table. MartyParty also emphasized that the imminent FTX liquidation is solely for selling the wallet keys, not the wallet’s contents.

Further clarification by MartyParty indicates that when the staked tokens are set aside, FTX and Alameda only hold 7 million SOL and Wrapped SOL (wSOL). These are already slated for pre-sale to the Solana Foundation.

In MartyParty words, “There is no more Solana to sell.” When viewing this in light of Solana’s daily trading volume, which fluctuates between 350 million and 450 million tokens, it’s evident that the market can comfortably absorb the FTX liquidation without significant disruption.

To provide perspective, even a total liquidation of FTX’s SOL holdings at the current market rate would tally up to $128.6 million. Not to mention, the weekly sell-off cap set at $100 million further ensures market stability, according to MartyParty.

MartyParty concluded his deep dive by emphasizing that no liquidation event in the past has significantly shaken the crypto market. It’s a “narrative spun to spur sales, with exchanges often capitalizing on the panic to buy low and sell high.”

Meanwhile, over the past 24 hours, Solana has been bullish. The asset is currently up by 4% with a market price of $19.05, at the time of writing.

Featured image from iStock, Chart from TradingView