Q9 Weekly | SOL Long, Farewell?

Q9 Capital
6 min readSep 14, 2023

14 September 2023

· FTX to liquidate $3.5bn of cryptoassets

· Sale includes $1.2bn of Solana, plus other alt-coins

· Will the sale cause an alt-coin crash?

Much has been made this week of an impending altcoin crash after FTX announced they will sell $3.5bn worth of their cryptoassets (including $1.2bn of Solana) in order to return fiat currency to users — spooking some investors. A wide range of “Sam Coins” and small-caps including Solana, Arbitrum, Polygon, and Aptos have seen steep drops this week.

Prior similar incidents of large-volume sales had a major influence on the cryptocurrency market, and drawdowns began even before the sale started. However, much of the FUD circling this week on Twitter (X) is overblown and evidence suggests any swoon in prices may be short lived.

Details on the Sale

FTX was given the green light on Wednesday to sell billions in crypto by the judge overseeing its bankruptcy proceedings — including $3.5bn in Solana, Ethereum, Bitcoin, and other alt-coins — with imposed conditions. The company has appointed Galaxy Digital as the investment manager overseeing the sale.

According to the plan, FTX will cap its selling at $100mn worth of tokens per week, a limit that could be increased to $200mn on an individual token basis.

SOL Falls vs BTC, ETH and the S&P 500 (1 Month)

Source: TradingView

The prospect that a crypto player selling off as much as $100mn of assets a week has already chilled crypto prices, but the FTX bankruptcy process isn’t likely to cause any severe market shocks. The firm is not going to dump all its holdings onto the market in one go and has a vested interest and an obligation to return as much as possible to its former clients, meaning it gains no advantage from tanking the market.

The sale will be spread out over a prolonged period and the introduction of these limits serves the dual purpose of mitigating the impact of token sales on the broader market while still ensuring that FTX can satisfy its creditors.

Its holdings are also largely comprised of vesting tokens that are not immediately liquid in open markets. Many of the SOL tokens are locked in a vesting schedule until 2025 at the earliest. A potential buyer could pick up the SOL for sale, but would have to abide by the vesting schedule.

Plus, many of their holdings will likely not be market sold, with the majority transacting OTC. Those that aren’t will be sold slowly via market markers. The BTC and ETH they hold is a good amount, but not in the billions — this is absorbable buy pressure. Aptos — this is the only one to maybe worry about, but again that would only be if they dumped all the coins in one go. Which they won’t.

The US Trustee originally objected to FTX’s plan, saying that any intention to sell BTC or ETH should be flagged as widely as possible to give others an opportunity to object. The exchange will still not have to issue advance public notice of transactions given their market-moving implications… but in its compromise, FTX has agreed to keep the US Trustee privately in the loop, alongside committees representing the exchange’s creditors — so there’s proper oversight and risk management here too!

Nevertheless, jittery traders have already started to offload SOL, with the asset down 6.2% to $14.8 over the week. SOL is currently at its lowest level since late June and is the worst-performing crypto asset in the top 30.

The Layer-1 is clearly down, but it’s not out. It’s likely that Solana will experience heightened volatility in the coming weeks, but the protocol still shows amazing potential in the years to come.

SOL Price Since Launch

Source: TradingView

What Does FTX Actually Hold?

So much of the FTX saga concerns bewildering questions about what was actually real there. How much money did clients have? Where did it go?… etc. On the other hand, a bankruptcy restructuring is all about being super tangible, searching to figure out how much stuff there really is and what’s it worth.

FTX’s bankruptcy overseers released an illuminating report this week listing about $7bn of assets, include digital assets, cash, brokerage investments, its venture portfolio, tokens and real estate.

The report showed that FTX owns $1.16bn in Solana (SOL), $560mn in Bitcoin (BTC), $192mn in Ethereum (ETH), and $137mn in Aptos (APT), amongst other holdings. The crypto prices in the court document are based on pricing from August 31.

Source: FTX

The presentation also shows that FTX owns 38 properties worth $222mn in Bahamas real estate and a total of 1,300 tokens.

Over 2,300 non-customer claims have been filed against it, including those from Genesis, Celsius and Voyager. The claims are worth $65bn, although those from FTX Digital Markets are “assumed to be invalid/redundant.

Over 36k customer claims, worth $16bn, have been filed against FTX and FTX US, and 10% of those have been agreed on.

Its venture portfolio was worth about $4.5bn across 438 investments at the time of its bankruptcy. Of that sum, $3.8bn has been recovered.

Source: FTX

In addition, it has identified over 50 potential actions against “insiders,” including Sam Bankman-Fried, Nishad Singh, Gary Wang, Caroline Ellison and 46 others, for a total of $2.2bn.

Source: FTX

Equity investments in 202 firms make up the bulk of the remaining funded investments, with the largest chunk being $1.2bn in crypto-miner Genesis Digital, followed by $500mn in artificial intelligence firm Anthropic and $110mn in Voyager Digital.

More than 75 potential bidders to relaunch FTX and/or FTX US have been contacted, according to the presentation. They have until Sept 24 to place bids. Confirmation of the recovery plan is targeted for the second quarter of 2024 — however, many wounded traders, including myself, will be wishing the noxious exchange so long, farewell, forever.

In the News…

· Fund giant Franklin Templeton plots spot bitcoin ETF

· GBTC ‘discount’ hits smallest since 2021

· Binance US CEO quits as embattled crypto platform slashes one-third of staff

· JPMorgan exploring blockchain-based deposit token for payments, settlements

· Institutional crypto adoption in Asia is growing

· The Atlantic: An FTX executive who broke with the others

· Thodex CEO Gets 11,000-year jail sentence over $2bn crypto exchange collapse

· TOKEN2049 Singapore sets record-breaking attendee and sponsor numbers

· Fireblocks introduces non-custodial wallet service

· Grayscale court victory used in arguments for spot ether ETF

· BNB Chain’s Layer-2 network opBNB goes live

· Mastercard ‘committed’ to making CBDCs as easy to use as money

· CoinDesk Indices expands into APac through deal with ICE

· BitMEX’s prediction market is now live

· Nasdaq receives SEC approval for AI-based trade orders

· Solana support comes to MetaMask with Solflare integration

· CB Insights The State of Tech M&A Report 2023 Q2

· Animoca Brands raises $20mn to pursue ‘single native Web3 project’ Mocaverse

· Pantera Capital leads $16.5mn investment in ZK-powered DEX Brine Fi at $100mn valuation

· Pahdo Labs raises $15mn to let players make anime games with AI tools

· Ripple to acquire crypto custodian Fortress Trust

· Are NFT markets in a death spiral or ready for a resurgence?

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