Coinbase Expects FTX's Crypto Liquidation Sales to Have Minimal Market Impact

The recent research report from Coinbase offers reassurance that the token sales stemming from the insolvent crypto exchange, FTX, will not lead to an overwhelming surge in the market. This confidence is primarily rooted in the predetermined limitations on liquidations tied to trading volume, as outlined in the report.

Coinbase points to various factors that bolster the belief that FTX's token sales, despite its financial difficulties, won't provoke a substantial market upheaval. Initially, liquidations are restricted to $50 million weekly in the initial phase. This cap is slated to rise to $100 million in the ensuing weeks. The report underscores that any permanent augmentation, potentially up to a maximum of $200 million on a weekly basis, would necessitate endorsement from committees representing FTX's debtors.

A recent legal filing unveiled that FTX possesses a considerable array of diverse cryptocurrencies, encompassing approximately $1.16 billion in solana (SOL), $560 million in bitcoin (BTC), $192 million in ether (ETH), and an additional $1.49 billion in various other tokens. Following a recent court ruling, FTX is now authorized to vend and allocate these holdings to settle outstanding debts.

Furthermore, the report underscores the existence of rigorous protocols governing the sale of particular tokens linked to insiders. These procedures mandate a compulsory 10-day advance notice to the committees overseeing the process. It's noteworthy that a significant portion of FTX's solana holdings remains locked until 2025, in accordance with the token's vesting schedule.

Ultimately, once attaining approval from the committee, FTX will have the option to hedge its sales of bitcoin, ether, and other tokens through an investment advisor, as detailed in the supplementary information of the report. Collectively, these measures instill confidence in the report's assertion that FTX's token sales are unlikely to lead to significant market disruption.