Thursday, 21 September 2023

Crypto News

Solana traders prepare for FTX-induced sell pressure on SOL — Is it premature?

Solana traders prepare for FTX-induced sell pressure on SOL — Is it premature?

For a long time, Solana (SOL) has been associated with the founder of now insolvent crypto exchange FTX and hedge fund Alameda Research, Sam Bankman Fried. He was an early investor in the project and invested in numerous Solana ecosystem projects during the 2020-2021 bull mania.

So when FTX collapsed toward the end of 2022, Solana and other “Sam coins” plummeted significantly, falling to lows of $9.89 — down 96.3% from the peak of $259.96.

Since the start of 2023, Solana’s price staged a recovery to gain 175% to reach a peak of $27.37 as the ecosystem also witnessed growth.

However, more recently, SOL came under tremendous selling pressure after the Delaware Bankruptcy Court approved the sale of FTX’s digital assets, which includes 55.75 million SOL worth $1.062 million. However, the unlock schedule of FTX’s holdings and derivative market positioning suggest that a counter move to the upside could happen instead.

After Judge John Dorsey made the ruling at a hearing on Sept. 13. SOL price touched a weekly low of $17.96 after the court ruling.

However, SOL price gained around 4% on Sept. 14 with longs worth $800,000 liquidated since yesterday, per CoinGlass data.

Crypto trader MartyParty believes that selling pressure is overblown as the majority of FTX’s SOL stake is vested from 2025 to 2027.

Moreover, for the derivatives traders have piled on with short orders after the announcement, which could result in a counter move to the upside.

Most FTX tokens are locked

The Solana Foundation had released an update on FTX’s Solana holdings after its collapse, which showed that a portion of SOL tokens held by the defunct exchange are locked until 2027.

According to the schedule, more than 33 million SOL tokens are yet to be unlocked. It represents more than 60% of FTX’s holdings to be sold in the market.

FTX/Alameda Research’s SOL holdings and unlock schedule. Source: Solana Foundation

According to the terms of the crypto conversion to fiat by FTX, there will be a cap of $50 million for the first week and $100 million in subsequent weeks, which limits the selling pressure.

There is an option to increase…

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