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Solana Experiences 6% Downturn Amid FTX Liquidation Concerns

Solana Experiences 6% Downturn Amid FTX Liquidation Concerns

Solana’s value has declined over 6% in the past day. This is mainly due to the looming anxiety surrounding the potential liquidation of substantial cryptocurrency by the financially troubled crypto platform FTX. The concerns are not limited to Solana alone but extend to other digital assets linked to the Solana ecosystem.

Analysis from Solscan, which aggregated data from the three transparent FTX cold storage wallets, suggests that FTX possesses about $1.5 billion in digital assets within the Solana network.

Cold Storage Insights

Within this significant sum, the Solana token’s contribution is approximately $128 million. The remainder comprises various Solana-related altcoins, including Wrapped Bitcoin (WBTC), Maps token (MAPS), Serum (SRM), and several other tokens informally known as “Sam coins” — a playful nod to ex-FTX chief Sam Bankman-Fried.

However, the prospect of liquidators potentially flooding the market with $128 million of SOL and several hundreds of millions of other SOL-linked tokens is causing a stir among market participants.

On X (previously known as Twitter), several users shared their apprehensions about the impending mass sell-off. Comments such as “FTX getting ready to offload $680 mil of SOL 👀” and “SOL’s price is set to plummet after FTX offloads its holdings, potentially hitting $14 soon” were prevalent.

Yet, some call for a more measured response, highlighting the bankruptcy stipulations that limit the volume of asset sales.

FTX’s Liquidation Strategy

Per FTX’s bankruptcy documentation, specific conditions are attached to the proposed token sales. FTX recommended Mike Novogratz’s Galaxy Digital Capital Management on August 24 to manage the liquidation of its reclaimed crypto assets.

The outlined strategy would restrict the FTX estate from selling more than $100 million of its tokens weekly, with a provision to increase this to $200 million for specific tokens if needed.

These constraints aim to mitigate the potential shock such sales could inflict on the broader crypto market while ensuring FTX’s obligations to creditors are met.

It is worth noting that this plan has not received official approval from the judiciary. However, discussions around this proposal and other topics connected to the FTX token sales are slated for a session in the Delaware Bankruptcy Court on September 13.

During a session on April 12, FTX revealed that it had regained nearly $7.3 billion in liquid assets. Of this amount, $4.8 billion was retrieved as of November 2022. As per data shared during the same hearing, FTX reported having assets worth $4.3 billion in cryptocurrencies up for stakeholder recovery based on the market valuations on April 12.

As of the last update, Solana’s trading rate is $18.38 per unit, indicating a weekly drop of almost 11%.

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