Digital asset markets are seeing increased volatility as traders look to try and evaluate the effects of prospective crypto disposals by the now-defunct exchange FTX as in undergoes the bankruptcy process.
Administrators in the bankruptcy process for FTX have recovered approximately $7 billion in assets, including $3.4 billion in cryptocurrency tokens. On Wednesday there will be a court hearing which will consider a plan to begin selling off tokens to start repaying creditors, according to recent filings.
A recent presentation showed that FTX was in possession of almost $1.2 billion in SOL, the native token of the Solana network. It also held about $560 million in Bitcoin, the world’s most established crypto asset, and $192 million in ether, the second largest cryptocurrency in the world.
On Monday, a gauge of the 100 largest tokens fell almost 3%, before regaining almost all of its losses on Tuesday. Bitcoin performed similarly, and was trading 4% higher at $26,190 as of 11:57 AM in New York.
James Butterfull, the chief of research at CoinShares, said that the bounce-back in Bitcoin’s price could be, in part, due to macro-sentiments.
Butterfill said, “If you look at futures data for rate hikes in September, they dropped a little bit, We’ve also seen a bit of a pickup of people adding short positions in the last week, which is quite a contrarian signal.”
FTX is attempting to see the asset management arm of billionaire Michael Novogratz’s Galaxy Digital Holdings Ltd., to oversee the tokens which belong to the defunct exchange. According to an August filing, the weekly limit which has been set for crypto-disposals ranges from $50 million to up to potentially $200 million.
Markus Thielen, head of research at Matrixport, wrote in a note that the market is “apprehensive about the upcoming FTX creditor liquidation.”
As a general rule the worst month of the year for crypto-assets is September. Over the past decade, according to data compiled by Bloomberg, Bitcoin has fallen an average of 6.2% in the month.
In addition, there are chart patterns, which also make the case for a period of weakness for Bitcoin. A so-called point and figure study, which analyzes when the token moves up or down by at least 1%, indicates the $24,500 support level is in danger. It it is broken through, the analysis indicates the token will test $24,000 and then $21,400, according to the analysis.
At the same time, Franklin Templeton has applied for a US spot-Bitcoin ETF, although Stephane Ouellette, co-founder and CEO of FRNT Financial, says this will likely not change anything. She said, “More ETFs just means that the market share is more split up, but doesn’t really change access for the investor.”
Other analysts point out that on Wednesday a US inflation report is due. If there are signs of sticky price pressures, investors may conclude interest rates will be maintained at higher levels for longer, a state which usually acts as an impediment for riskier investments.
