Fear of FTX’s liquidations are overblown

FTX liquidators published a new summary of the bankrupt exchange’s holdings this week, valued at $3.5 billion. The initial news triggered a quick sell-off, but this has since recovered for good reasons. The sales of Bitcoin and Ethereum may reach up to $100 million per week, totaling $752 million. However, it appears that stricter controls will be applied to the smaller-cap coins, possibly aimed at minimizing market turmoil.

Traders’ choices confirm this assumption. Even during the weekly lows on September 12th, the price of shorting Ripple, Solana, Aptos, and Stargate Finance on Binance’s perpetual contracts barely budged. Meanwhile, open interest remained unchanged.

Nevertheless, the situation is grim for tokens like BitDAO, with $49 million in tokens awaiting liquidation. With a maximum market depth of $24,000 at 2% from the price on SushiSwap, Galaxy Digital, the official liquidators, face a grim task. One of the best options for tokens in this predicament would be to sell them back to the DAOs and foundations that created them.

Taking a closer look at the perpetual contracts, this week, negative funding on Aptos has doubled from around -0.015% to approximately -0.03% today. These changes are still marginal. The same applies to Stargate Finance, which has $46 million in assets for sale, and Solana, with a total of $1.1 billion in tokens, including over $300 million available for liquidation. Since the Galaxy Digital announcement on August 25th, funding for Solana has shifted from marginally positive to marginally negative.

When selling smaller-cap coins commences and becomes meaningful, it will be clearly signaled by a shift in the funding rates (the price of shorting).