SBF and Caroline Ellison Plot to Keep Bitcoin Under $20K, But Did It Work?

On October 11, Caroline Ellison, former head of the now defunct Alameda Research, informed a US court that she received instructions from FTX co-founder and CEO Sam “SBF” Bankman-Fried to sell Bitcoin (BTC). The price is over $20,000.

This admission came as a shock to the entire crypto industry, but the two conspiring to suppress the price of BTC, actually doing it, are two different things.

While no details are available regarding the size and timing of these trades, the timing will likely fall between September and October 2022, weeks before Alameda and FTX collapse.

Determining whether Alameda effectively acted to suppress Bitcoin's price below $20,000, as alleged by some analysts and traders, is challenging, if not impossible. However, it is possible to assess the significance of FTX's Bitcoin holdings relative to other exchanges and overall trading volume.

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Currently, the only reliable publicly available data concerns BTC wallets, which previously held the exchange's reserves, which will be below 47,000 Bitcoin by September 2022, according to Glassnode data. It is possible that Alameda Research directly holds other addresses, but given the company's high debt, it is unlikely to have any liquid reserves.

One should not assume that FTX has used the entire Bitcoin stack it has received from users until November 8, 2022, if the exchange continues to process client withdrawals. Taking these assets suddenly can accelerate their loss. Nevertheless, it is worth examining the importance of FTX volumes and holdings.

In the year As of July 2022, FTX reported a bitcoin volume of $30 billion, equivalent to an average of $1 billion per day. But it is not good to rely on these numbers given the exchange's history of data manipulation as demonstrated by their fraudulent insurance fund calculation methods.

Assuming that the sales mentioned by Ellison took place on FTX, the order of 4,000 BTC, worth 80 million dollars at the time, represents only 8% of the average daily volume of the exchange. Additionally, considering the total volume of bitcoins from major exchanges, Alameda's estimated order size is even more insignificant.

According to Mesari's “True Voice” method, which does not include bath trading, the total Bitcoin volume between September and October 2022 was less than $3.5 billion per day. Although Alameda attempted to sell 25% of its 47,000 BTC holdings in one day, that $240 million represented only 7% of the major exchanges.

For comparison, in April 2022, MicroStrategy announced that it had bought 4,167 bitcoins for an average of $45,714, for a total of $190 million. This probably happened at the end of March, when the price of Bitcoin increased by 6% from $44,580 to $47,270.

Two significant aspects of price action during microstrategy buying stood out. First, the price dropped below $46,000 on April 5, 2022, the same day it was announced. After all, the high of $48,000 seems to match the levels at which the microstrategy ended its execution, resulting in an average price of $45,714.

However, looking at the broader picture, Bitcoin was trading around $39,500 in the two weeks prior to the micro-strategy move and dropped to $39,500 a few weeks later. While Tesla is dumping $936 million worth of Bitcoin or Alameda's FTX customer deposits, there's no reason to believe that a single entity can effectively suppress the price for more than a week.

To provide some context, Binance held 623,000 BTC in reserve in August 2022, while Coinbase had nearly 690,000 BTC. Combined, these two exchanges hold 28 times more Bitcoin than FTX. This fact highlights the limited impact of the SBF and Caroline's venture in terms of effective firepower.

Essentially, there may be a few days where Alameda successfully pressured, their sell offs causing the price of Bitcoin to drop below $20,000. However, given their reserves and the price action of orders of the same size, the event is not significant when analyzing over a month.

This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.