The hard landing of the bankrupt crypto exchange, FTX, may not be as severe as many initially feared. The United States Bankruptcy Court for the District of Delaware recently approved the liquidation of nearly $3.4 billion of crypto assets, a sight often associated with market-wide panic. However, experts suggest that the carefully phased liquidation schedule will maintain market stability, a key concern as the industry faces unprecedented scrutiny.
Immediately following the court’s approval was the unveiling of $1.3 billion in recovered assets, and $2.6 billion in cash. This led to a total of $7.1 billion in liquid assets, a sigh of relief for the numerous creditors waiting in the wings. The majority of the liquidated assets belonged to Solana and Bitcoin, which held a value of $1.16 billion and $560 million, respectively.
For assets such as Bitcoin, Ether, and other insider-affiliated tokens, a 10-day advance notice is required before sell-off to U.S. trustees appointed by the Department of Justice. This ‘cooling-off’ period enables various financial instruments, such as futures, options, and perpetual swaps to mitigate losses.
In safeguarding the crypto market, the bankruptcy court permitted FTX to sell digital assets in weekly batches, with Galaxy Digital handling the assets’ liquidation to benefit FTX’s creditors. This controlled approach will ideally prevent significant market fluctuations, as just $50 million in assets can be sold in the first week, and succeeding weeks capped at $100 million.
While FTX’s asset liquidation has caused wide industry concern, restructuring strategies seem to aim for a minimal impact on the general crypto market. For example, the significant volume of Solana assets held by FTX slated for liquidation became a major discussion point. It is estimated that a significant portion of these tokens will gradually release into the market until 2028, via linear vesting or scheduled unlocks.
FTX’s case has indeed dealt a severe blow to public trust in the crypto ecosystem, with the exchange’s alleged illegal behavior tainting its credibility. However, the careful and strategic planning around the liquidation of FTX’s assets seems likely to protect the stability of the wider crypto market, at least in the eyes of creditors and the court. What remains to be seen is whether this approach will be an effective remedy for the damage done and restore faith in the resilience and integrity of the crypto world.
Source: Cointelegraph
