FTX Wallet Raises Concerns of Imminent Token Sell-Off

• From August 31, an FTX wallet sent about $10 million in Solana tokens through a Wormhole bridge to another FTX wallet.
• With over $8 billion of FTX funds unaccounted for, current management has reportedly recovered at least $5 billion of liquid assets.

Almost a year since the implosion of the FTX cryptocurrency exchange and its sister investments firm Alameda Research and their effects are still reverberating across the industry. With the majority of FTX creditors advocating for a refund instead of a revival, most crypto investors fear the effects of an intensive sell-off. A recent study conducted by blockchain analytics platform Arkham Intelligence reveals that FTX has made several transactions involving top digital assets.

Notably, FTX-associated addresses have moved around $10 million in SPL tokens through the Wormhole bridge to an FTX ETH-based wallet since August 31. Precisely, FTX moved about $1.2 million of FTX Token, $1.8 million worth of Uniswap, $1.3 million of HXRO (HXRO), $550k worth of SushiSwap, and $260k worth of Frontier Token (FRONT) to the ETH network via a Wormhole Bridge.

🚨 FTX wallets on the move🚨

Over $1.5B worth of $SOL, SPL tokens, and Wrapped #Bitcoin in FTX’s Solana addresses are shifting‼️

Looks like they’re gearing up for potential sell-offs.

Keep an eye on this, especially the ~$200M in #Solana Wrapped $BTC.#crypto #bitcoin … pic.twitter.com/sRDI6hvTJD

— Pump House 🍥 (@pumphouz) September 3, 2023

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Why FTX Liquidations Matter to Every Crypto Investor

FTX was among the top-rated centralized cryptocurrency exchanges before its downfall late last year. The exchange handles users’ cash directly by depriving investors of their security key phrases for recovery. The liquidation of FTX and Alameda Research has been a huge lesson to crypto investors. Furthermore, the use of non-custodial crypto wallets like Ethereum-based MetaMask and Binance-backed Trust wallets has significantly increased YTD compared to prior years.

The downfall of FTX wiped out over $32 billion from the crypto wallet, as John J. Ray III, Chief Executive Officer and Chief Restructuring Officer of the FTX Debtors, highlighted that about $5 billion of liquid digital assets have been recovered. On August 24, the current FTX management proposed a plan to appoint Mike Novogratz’s Galaxy Digital Capital (GDC) Management as the investment manager charged with overseeing the sale and management of the recovered digital assets.

Notably, the proposed plan highlighted that the FTX estate would only be permitted to sell about $100 million worth of tokens per week. Additionally, the proposal included a clause that the limit could be raised to $200 million on an individual token basis. Moreover, the proposed limits are intended to minimize the impact of token sales while simultaneously allowing FTX to make creditors whole.

Essentially, a huge crypto sell-off tends to influence short-term traders to offload their holdings in a bid to short the market. Consequently, the affected crypto assets tend to lose more over time.

On the Bright Side

The cryptocurrency industry has received increased regulatory scrutiny in the past year to ensure the safe adoption of digital assets. As a result, crypto exchanges have minimized the risks of interfering and mixing customers’ funds with corporate assets. More jurisdictions have regulated crypto exchanges to ensure transparency and in turn, avoid another instance of FTX and Alameda Research.

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