FTX’s $3.4 Billion Creditor Liquidation Sparks Major Crypto Market Volatility

Since the beginning of the week, the broader cryptocurrency market has been seeing some sort of volatility over reports of the FTX credit liquidation due ahead this week after the court hearing on Wednesday.

The administrators of bankrupt crypto exchange FTX have recovered about $7 billion in assets, including $3.4 billion in cryptocurrencies. A court hearing is scheduled for Wednesday to consider a plan to begin selling the tokens to help repay creditors.

A presentation by FTX shows that the exchange holds nearly $1.2 billion in SOL, the native token of the Solana network. The inventory also includes $560 million in Bitcoin and $192 million in Ether.

The total amount of assets recovered by FTX is more than the $8.7 billion that the exchange owed its customers when it filed for bankruptcy in November 2022. However, the exchange still faces a shortfall of about $2 billion, which it hopes to cover by selling the recovered assets.

The court hearing on Wednesday will be the first opportunity for creditors to weigh in on the proposed sale plan. If approved, the sales could begin as soon as next month. As a result, the market is quite apprehensive of the upcoming FTX creditor liquidation.

The bankrupt crypto exchange FTX is seeking to appoint the asset management arm of Galaxy Digital Holdings Ltd., founded by billionaire Michael Novogratz, to help oversee its giant pile of tokens. The weekly limit for the disposal of cryptocurrencies would range from $50 million to $200 million, according to an August filing.

The broader cryptocurrency market has witnessed strong volatility over the last two days. On Monday, the Bitcoin price tanked under $25,000, however, BTC has recovered since then and is currently trading above $26,000.

With the news of FTX creditor liquidation, the Solana cryptocurrency, which is its biggest holding has come under significant selling pressure. Earlier this week on Sunday, September 11, the SOL price tanked all the way to the 2023 low of $17.36.

Alternative cryptocurrencies (altcoins) are underperforming on Tuesday, with Solana (SOL) leading the losses with a decline of more than 8%. Toncoin (TON) and layer 2 Arbitrum (ARB) are also down by similar amounts, while Ripple (XRP) is down 5%.