What does it mean for crypto markets?

FTX's bankruptcy filing reached a key milestone in the second week of September after the United States Bankruptcy Court for the District of Delaware approved the sale of $3.4 billion worth of crypto assets.

The court approved $1.3 billion in brokerage and government recovered assets as part of the liquidation process, and $2.6 billion in cash, bringing the total to $7.1 billion in liquid assets.

Among the most liquid cryptocurrencies, Solana (SOL) is at the top with a value of $1.16 billion, while Bitcoin (BTC) is the second largest asset with a value of $560 million.

Other assets to be released are $192 million in Ether (ETH), $137 million in Aptos (APT), $120 million in Tether (USDT), $119 million in XRP (XRP), $49 million in Biconomy Exchange Token (BIT), $46 million. At Stargate Finance (STG), $41 million in bundled Bitcoin (WBTC) and $37 million in bundled Ethereum (WETH).

Bitcoin, Ether and related tokens may be sold only after giving 10 days prior notice to US trustees appointed by the Department of Justice. The court also allowed foreclosure options for these properties.

A hedging allowance is useful as FTX can use various financial instruments such as futures, options and perpetual swaps to cover losses.

The ruling attracted industry-wide attention due to the large amount of crypto assets allowed for sale, with many questioning its potential impact on the crypto market.

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Joshua Garcia, a partner at Web3-based law firm Quetzal, told Cointelegraph that determining whether the liquidation was the right decision is challenging. Bankruptcy courts should focus on what's in the best interest of creditors, he said, and creditors may be more concerned with getting their money back than with the potential decline in the value of the liquidated assets.

“Whether or not this decision will affect the value of the token will probably not be the court's primary concern. A potential or perceived market effect will mean nothing to a judge or a committee of creditors if it does not, at least in the eyes of the court, completely harm the creditors. The concern here is that millions of users have suffered huge losses due to FTX's actions. Making victims as complete as possible is the main priority.

The availability of billions of dollars in liquid assets also provided relief to many creditors.

Blake Harris, an asset protection attorney, believes that checking liquid assets can be a game changer in FTX bankruptcy cases. He told Cointelegraph that the newly acquired liquid assets can provide more flexibility in asset management, allowing for a strategic approach that balances immediate legal requirements with broader market implications. financial obligations, but it is important to consider how these assets are managed to prevent similar situations in the future.

Market analysts predict that the prices of Yesolana and Aptos are more likely to experience price volatility after being adjusted based on the daily trading volume of each token.

How much impact will the FTX liquidation have on the market? #SOL (81%) and #APT (74%) will have the most impact when looking at the daily trading volume of each token #BTC, #XRP and #. BNB liquidations will have very little impact on the market as each is 1% or less… pic.twitter.com/XXIoZbKfBm

— Velvet.Capital (@Velvet_Capital) September 17, 2023

FTX liquidity does not pose a risk to the crypto market.

The bankruptcy court has taken steps to ensure that the liquidation of FTX's assets does not burden the crypto market.

The court order allows FTX to sell digital assets on a weekly basis through an investment advisor according to predetermined rules. Galaxy Digital is entrusted with liquidating its assets while ensuring market stability and maximizing profits for FTX lenders.

The court also permitted FTX to exercise deposit options through its qualified trustees using their own private guarantor if the Debtors reasonably determine in their business judgment that such activities are in the best interests of their assets.

There will be a $50 million cap on property sales in the first week, followed by $100 million in subsequent weeks. After court approval and prior written consent of the creditors' committee and the interim committee, the cap may increase by up to $200 million per week.

Business attorney Anthony Panebianco told Cointelegraph that legally, a court could allow a debtor to dispose of assets “outside the normal course of business” to pay creditors.

“The wonderful part is that the court has taken an additional step to look at the entire market place of the properties it is allowing to be disposed of. That is, the court is looking to protect both creditors and non-creditors of FTX in the manner it has ordered.

It also highlighted different liquidity strategies for BTC and ETH. He said, “The court-approved Bitcoin and Ether hedge arrangement is subject to certain investment guidelines.” The court said that due to FTX's large position in Solana, the hedge arrangement did not include Solana in these eligible assets. All three appear eligible for renegotiation with the regulator.

Of all the crypto assets held by FTX, Solana has been the main talking point due to its $1.1 billion worth of assets on the bankrupt crypto exchange's balance sheet. According to market analysts, those looking at short positions should be careful about the opening period of the tokens held by FTX, which will be fully opened in 2028.

Looking at FTX's SOL staking launch schedule, a significant portion of these tokens will go to market through linear vesting or planned launches until 2028, with the largest launch planned for March 2025. Most of the SOL is locked into the contract.

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A linear vesting program provides an easy way to gradually release token balance over a period of time.

Currently, only 24% of the total $1.16 billion SOL tokens have been unlocked. Apart from Solana, Aptos tokens are 100% locked and will be unlocked in stages over the next few years.

In its own analysis, Coinbase crypto exchange maintains its scheduled and standardized liquidity market, citing strict controls on the sale of certain “inside-linked” tokens and the closure of FTX's SOL holdings until around 2025. To the landing program of the token.

While many experts say markets are more or less safe amid FTX liquidity, the exchange's saga is far from over, with former CEO Sam Bankman-Fried's legal team agreeing with prosecutors on exceptions ahead of the trial.

Moreover, the allegedly illegal nature of the exchange has seriously damaged public trust in the crypto ecosystem.