Solana entities sold 50M tokens to FTX — How long will SOL price suffer?

Must read

Bitfinex holds the highest amount of Tether(USDT) at 60%, exchange balances surpass ATH

Bitfinex holds the highest amount of Tether(USDT) at 60%, exchange balances surpass ATH Richard Adrian · 20 mins ago · ...

Gemini reveals $601M GUSD backing, 45+ licenses amid global exchange turmoil

Gemini reveals $601M GUSD backing, 45+ licenses amid global exchange turmoil Liam 'Akiba' Wright · 5 hours ago · 2...

CryptoSlate Wrapped Daily: Ethereum losses deflationary gains; Andre Cronje reveals how DeFi saved Fantom

CryptoSlate Wrapped Daily: Ethereum losses deflationary gains; Andre Cronje reveals how DeFi saved Fantom Christian Nwobodo · 3 hours ago ·...

Upbit’s parent company Dunamu sees profit drop 76% in Q3

Upbit’s parent company Dunamu sees profit drop 76% in Q3 Soumen Datta · 6 hours ago · 1 min read...

Solana (SOL) has lost 60% of its market value in a week due to its exposure to the now-defunct crypto exchange FTX, which could continue to haunt the “Ethereum killer” well into the future.

FTX/Alameda exposure hurting Solana price

FTX and its sister-firm Alameda Research is liable to have control over 50 million SOL, according to Solana’s statement released on Nov. 10.

The FTX entities received 4 million SOL from the Solana Foundation on Aug. 31, 2020. They also started receiving a portion of 12 million SOL from Sep. 11, 2020, and nearly 34.52 million SOL from Jan. 7, 2021, through a “linear monthly unlock” mechanism.

Summary of SOL sales to FTX/Alameda Research. Source: Solana Labs

Furthermore, the FTX entities started receiving portions of a 7.5 million SOL reserve from Solana Labs on Feb. 17, 2021. Notably, a transaction worth 62,000 SOL between the same entities stands unsettled.

Most SOL tokens promised to FTX/Alameda are vested, meaning the firm does not yet have them in custody but is liable to receive them through the linear monthly unlock mechanism. The last of these unlocks will occur by January 2028.

That leaves the market with interpretations about what might happen to the SOL tokens once they are unlocked, given FTX’s bankruptcy filing that’s likely to put a freeze on all remaining funds.

my guess is the bky trustee will try to sell it all OTC to get funds to pay back creditors

— DeFiNanner v2 (@ZekesMommasKid) November 14, 2022

Also, the firm reportedly has $9 billion in liabilities versus a $1 billion balance sheet, which could prompt its trustees to liquidate its SOL holdings to repay debtors.

To avoid such a scenario, Solana could make technical changes to its token economy, reducing FTX’s impact. One recent governance proposal submitted on Nov. 13 presented a few options that could be on the table, including:

  1. The errant allocation is burned.
  2.  Increase the lock to 10 years on the errant allocation.
  3. Airdrop all SOL token holders’ additional SOL, except for the party holding the errant allocation.
  4. A combination of the above.

SOL price relief bounce?

From a technical perspective, Solana shows signs of bullish divergence between its price and relative strength index (RSI).

A bullish divergence materializes when an asset’s price forms lower lows but its momentum indicator form a higher low. Traditional analysts see it as a buy signal, which may result in a short-term SOL price recovery on its daily chart.

SOL/USD daily price chart featuring bullish divergence. Source: TradingView

SOL/USD could rise toward $18, its range resistance level, in the event of a short-term recovery. In other words, a 20% rebound.

Related: Liquidity hub Serum forked by developers after FTX hack

But on longer-timeframe charts, SOL could see further decline toward $2.50, or an 80%-plus drop, in 2023, based on a giant head-and-shoulders setup shown below. 

SOL/USD weekly price chart featuring head-and-shoulder breakdown setup. Source: TradingView

Interestingly, the token’s downside target falls in its most voluminous range, per its Volume Profile Visible Range, or VPVR, indicator.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

More articles

Latest article

Bitfinex holds the highest amount of Tether(USDT) at 60%, exchange balances surpass ATH

Bitfinex holds the highest amount of Tether(USDT) at 60%, exchange balances surpass ATH Richard Adrian · 20 mins ago · ...

Gemini reveals $601M GUSD backing, 45+ licenses amid global exchange turmoil

Gemini reveals $601M GUSD backing, 45+ licenses amid global exchange turmoil Liam 'Akiba' Wright · 5 hours ago · 2...

CryptoSlate Wrapped Daily: Ethereum losses deflationary gains; Andre Cronje reveals how DeFi saved Fantom

CryptoSlate Wrapped Daily: Ethereum losses deflationary gains; Andre Cronje reveals how DeFi saved Fantom Christian Nwobodo · 3 hours ago ·...

Upbit’s parent company Dunamu sees profit drop 76% in Q3

Upbit’s parent company Dunamu sees profit drop 76% in Q3 Soumen Datta · 6 hours ago · 1 min read...

Research: Whales have been offloading Bitcoin since 2021

Research: Whales have been offloading Bitcoin since 2021 Zeynep Geylan · 6 hours ago · 2 min read ...