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How long will the SOL price be affected by the sale of 50M tokens to FTX?
Written byKevin Lopez
November 16, 2022
- FTX and its sister company Alameda Research are believed to control 50 million SOL, according to a Nov. 10 statement from Solana.
- Most of the SOL tokens committed to FTX/Alameda are vested, meaning the company has not yet taken custody of them but has committed to receiving them through a linear monthly unlock mechanism.
- To avoid sales Solana could make technical changes to its token economy through the governance proposal that would reduce the impact of FTX.
- From a technical standpoint, Solana is showing signs of a bullish divergence between its price and the RSI.
Solana, which lost 60% of its market cap in a week due to its stake in the now-defunct cryptocurrency exchange FTX, may continue to haunt the “Ethereum Killer.”
FTX/Alameda Exposure Hurts Solana Price
FTX and its sister company Alameda Research are believed to control 50 million SOL, according to a Nov. 10 statement from Solana.
The FTX unit received 4 million SOL from the Solana Foundation on August 31, 2020. They also unlocked a portion of 12 million SOL starting September 11, 2020, and nearly 34.52 million SOL starting January 7, 2021, through a "linear monthly unlock" mechanism.
Additionally, on February 17, 2021, FTX Corporation began receiving a portion of the 7.5 million SOL reserve from Solana Labs. Notably, a transaction worth 62,000 SOL between the same company is pending.
Most of the SOL tokens committed to FTX/Alameda are vested, meaning the company has not yet taken custody of them but has committed to receiving them through a linear monthly unlock mechanism. The last activation will take place in January 2028.
Considering that FTX’s bankruptcy filing may freeze any remaining funds, this gives the market an explanation for what might happen to the SOL tokens once they are unlocked.
Additionally, the company reportedly has $9 billion in liabilities on a $1 billion balance sheet, which could prompt its trustee to liquidate its SOL assets to pay debtors.
To avoid this, Solana could make technical changes to its token economy that would reduce the impact of FTX. The most recent governance proposal, submitted on November 13th, puts a number of options on the table, including:
- The errant allocation is burned.
- Increase the lock to 10 years on the errant allocation.
- Airdrop all SOL token holders' additional SOL, except for the party holding the errant allocation.
- A combination of the above.
SOL price relief recovery?
From a technical standpoint, Solana is showing signs of a bullish divergence between its price and the Relative Strength Index (RSI).
A bullish divergence occurs when the price of an asset is making lower lows but its momentum indicator makes higher lows. Traditional analysts see this as a buy signal that could lead to a near-term recovery in SOL prices on the daily bar chart.
If there is a near-term recovery, SOL/USD could rise toward its range resistance at $18. In other words, a 20% bounce.
But on a longer time frame chart, SOL could drop again to $2.50 in 2023 or over 80% based on the huge head and shoulders structure shown below.
Interestingly, the coin’s downside target falls within its maximum range, according to its Volume Profile Visible Range, or VPVR metric.
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