A $3.4 billion sale of crypto holdings by the bankrupt crypto exchange FTX will combine with other market sell-offs to trigger an altcoin crash, says crypto services provider Matrixport.
FTX says it’s poised to sell up to $200 million worth of its crypto holdings each week as it frees up cash for creditors and a Sept. 11 report by Matrixport warns that selling pressure may intensify this week because FTX creditors also may begin offloading $685 million in holdings of Solana (SOL).
”The altcoin crash is coming,” it said. “At least $3.4bn worth of crypto is expected to be sold by FTX, which should create an overhang for altcoins for the rest of the year.”
📉 The #Altcoin Crash Looms
🌪️SOL funding rate negative, breaking $19 support. Watch $15 and $10. ‼️
— Matrixport (@realMatrixport) September 11, 2023
Venture Capital Funds To Remain ‘Crucial Sellers’ of Altcoins
FTX and its creditors are not the only sellers. Worsening the outlook is the ”immense pressure” on venture capital funds focussed on the crypto industry to return cash to their investors, it said in an earlier report.
“While some crypto VC funds made 10-20x returns, several have had substantial drawdowns, leading investors to prefer cashing out,” it said. “Multicoin Capital lost -91% of its value in 2022. Those VC funds are likely to remain as crucial sellers of altcoins and must cash out.”
Exacerbating things further is a $50 million unlock by ApeCoin (APE) that’s scheduled for this weekend, it said in yesterday’s report. The unlock allows mostly insiders to sell 11% of outstanding tokens. Since a previous unlock on Aug. 17, when 4.2% of ApeCoins were unlocked, the token’s price has slumped 36%. It’s down more than 15% during the past week.
The outlook for SOL is looking particularly bleak, it said. Its fallen 11.4% in the past seven days and traded at $18.03 at 5:30pm ET, up 2.3% for the day.
“Yesterday, we saw SOL breaking the $19 support with increasing volume,” it said. “This is concerning; the more significant target levels are $15 and $10.”
Matrixport also sees worrying signs for Bitcoin and Ethereum, the 500 pound gorillas of the crypto ecosystem. With ETH now perilously close to the psychologically important $1,600 level, a break could carry prices lower, it says.
Bearish Trends in Bitcoin and Ethereum
“Technically, the break of $1,650 makes us extremely cautious about Ether,” it said. “We could even envision a scenario where prices materially drop lower into year-end. A decline below $1,500 could bring back the idea that Ether could decline to $1,000 — a level that would appear justified based on the revenue projection from the Ethereum ecosystem.”
While Bitcoin is up almost 4% today, Matrixport says its overall trend also is down amid bearish market sentiment.
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