Crypto Market Watch: Altcoins Potentially Vulnerable to FTX Liquidations
FTX and Alameda’s Significant Altcoin Holdings
Crypto analytics company, Messari, has issued a warning regarding possible price drops for three prominent altcoins due to impending liquidations on the crypto exchange, FTX. The firm, alongside Alameda, holds significant stakes in Dogecoin (DOGE), Tron (TRX), and Polygon (MATIC), valued at $37 million, $33 million, and $22 million respectively.
The primary concern here is not the absolute value of these tokens, but their ratio to each asset’s actively traded volume. For instance, FTX and Alameda’s Bitcoin (BTC) holdings, valued at $353 million, account for approximately 1% of the weekly BTC trading volume. This indicates that the market can readily absorb a significant portion of any selling activity, a trend also observed with Ethereum (ETH).
Altcoins with Lower Liquidity Under Threat
However, for altcoins like DOGE, TRX, and MATIC, which have lower liquidity, the situation is different. The $20–30 million held by FTX represents a more significant percentage (6–12%) of their weekly trading volume. This could potentially have a more pronounced impact on the market due to the increased difficulty in absorbing such a large amount of selling activity.
Solana and Aptos: A Gradual Liquidation
Messari further highlighted that Alameda owns Solana (SOL) worth $720 million and Aptos (APT) worth $66 million. These holdings, however, mainly consist of vesting right tokens. Consequently, they are expected to be gradually liquidated, which should soften their potential impact on the markets.
Market Impact: A Tale of Liquidity and Volume
The main takeaways from this report are the potential risks faced by certain altcoins with lower liquidity, such as DOGE, TRX, and MATIC, due to the upcoming FTX liquidations. While the BTC and ETH markets are likely to absorb such liquidations due to their higher trading volume, the same cannot be said for these altcoins. Therefore, traders and investors should be aware of these dynamics when making investment decisions.
Furthermore, while Alameda’s significant holdings of SOL and APT are sizable, their gradual liquidation strategy is likely to minimize their potential impact on market prices. However, any changes to this strategy could significantly affect these coins’ market dynamics.