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The bankruptcy of FTX could have unexpected effects on the crypto market. While the defunct exchange is preparing to redistribute $16 billion to its aggrieved customers, experts are predicting significant buying pressure on Bitcoin and Solana. This massive injection of liquidity could well energize a market that has been in decline for several months.
A welcome influx of capital for Bitcoin and Solana
The distribution planned by FTX represents a considerable windfall for the crypto ecosystem. According to researcher Xremlin, a significant portion of these $16 billion should be reinvested in digital assets. Investors, already familiar with this market, could indeed be tempted to bet on cryptos again.
This massive arrival of liquidity occurs in a bearish market context. Bitcoin has lost more than 20% of its value over the past month, while Solana shows a 22% drop. The injection of new capital could therefore act as a catalyst and restart the bullish dynamic that investors have been eagerly awaiting.
Furthermore, this distribution could counterbalance the selling pressure exerted by the German government. They have indeed carried out significant sales of cryptocurrencies in recent weeks, weighing down prices.
The process of distributing FTX funds is set in a particular context. The key dates to remember are August 16, 2024, the deadline for creditor voting, and October 7, 2024, for the final approval of the liquidation plan.
If the schedule is respected, payments should begin by the end of the third quarter of 2024. This period coincides with the US elections, traditionally synonymous with increased volatility in the financial markets. The influx of liquidity from FTX could thus amplify price movements, particularly for Bitcoin and Solana.
The potential approval of a Solana ETF, following the application by Van Eck and 21Shares at the end of June, could also be an additional volatility factor. However, Gracy Chen, CEO of Bitget, remains cautious:
SOL still has some issues:
- Firstly, there is the stability and security of the Solana network. Since its launch, the Solana network has experienced outages almost every year. The most recent shutdown occurred on February 6 of this year due to a failure in the program loading mechanism and lasted 4 hours and 46 minutes. As a high TPS blockchain, a downtime of more than 4 hours could potentially impact a massive amount of data waiting to be recorded on the blockchain.
- Secondly, there is the upcoming large-scale unlocking: FTX is expected to unlock 8.29 million SOL tokens (equivalent to approximately $1.4 billion) in March 2025. This could potentially affect the stability of SOL token prices.
- Thirdly, there is the centralization of validation nodes: currently, Solana has 5,440 validation nodes, of which about 37% are located in the United States, introducing some centralization risk. If US regulatory authorities take unfavorable actions against Solana, this could significantly impact the Solana network and the price of the SOL token. Conversely, this also suggests that the United States exerts significant control over the Solana network, which could influence the SEC’s decision to approve a SOL ETF.
Considering these factors, excluding political elements, I think the probability that the application for a SOL ETF will be approved is low. Other tokens, like DOGE and SHIB, have relatively low market capitalizations and face high price volatility and potential market manipulation risks. Therefore, I think it is unlikely that the United States will launch other crypto ETFs in 2024.
In conclusion, the distribution of FTX funds could well mark a turning point for the crypto market. While Bitcoin and Solana are going through a difficult phase, this injection of fresh capital could breathe new life into the sector. Investors remain cautious, however, aware of the inherent volatility of these assets.
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Passionné par le Bitcoin, j’aime explorer les méandres de la blockchain et des cryptos et je partage mes découvertes avec la communauté. Mon rêve est de vivre dans un monde où la vie privée et la liberté financière sont garanties pour tous, et je crois fermement que Bitcoin est l’outil qui peut rendre cela possible.
DISCLAIMER
The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.
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