Market fears negatively impact the price of Solana (SOL).
Solana's token, SOL, has seen a significant drop in value within the last 24 hours, sparking market jitters that the troubled crypto exchange FTX could soon unload a large volume of SOL and related assets.
Recent data from Solscan reveals that FTX's cold storage wallets hold about $1.5 billion in crypto assets affiliated with the Solana network. Surprisingly, SOL tokens make up just $128 million of that amount, with the rest being various Solana-based altcoins, such as Wrapped Bitcoin (WBTC), Maps Token (MAPS), and Serum (SRM).
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The looming possibility of FTX liquidating $128 million worth of SOL and additional millions in SOL-based tokens has made investors anxious.
Many investors used social media platforms like X (formerly Twitter) to express their fears. Comments like "FTX about to dump $680 mil worth of SOL" and "SOL is going to dump hard after FTX sells its bag, going to reach $14 soon" are not uncommon.
However, it's crucial to note that FTX's bankruptcy plan specifies various conditions for asset liquidation aimed at mitigating market impact. FTX has proposed Galaxy Digital Capital Management to manage the asset sales.
According to the proposal, there is a weekly cap of $100 million for the sale of tokens, which could be increased to $200 million for individual tokens. The plan is designed to minimize broader market impact and satisfy creditors but is yet to receive court approval. It's scheduled for review by the Delaware Bankruptcy Court on September 13th.
As of an April 12th hearing, FTX revealed that it had around $7.3 billion in liquid assets, of which $4.8 billion were recovered as of November 2022.
While the potential liquidation of FTX's Solana assets has investors on edge, there are mechanisms to limit the immediate impact on the market. With SOL trading at approximately $17.60 at the time of writing, down nearly 11% for the week, all eyes will be on the Delaware Bankruptcy Court's decision on September 13th.
