$SOL Breakpoint Rally
The recent market rally has acted like a rising tide, lifting prices across the board for all tokens. $SOL however, had been gaining in strength weeks before the surge.
At the tail end of September, the token sparked its own rally, breaking away from the pack in pursuit of its own yearly-high, rising more than 100% in less than two months.
While many have attributed this surge to the currently-ongoing Breakpoint conference based on 2021’s performance, the rally has also been a culmination of other factors, such as the news on September 13th when FTX was granted permission by the court to begin its asset liquidation process.
With FTX in possession of more than 58M $SOL, bearish narratives circulated of a selloff leading to traders prematurely front-running the liquidation process, when in reality, the FTX Estate had yet begun selling.
This resulted in ill positioned shorts that aided in the grind up in price over 1.5 months.
Fast forward to 24th October, the FTX Estate began transferring assets to CEX and unstaking $SOL in the midst of the recent rally sparked by false news of a $BTC ETF being approved, taking advantage of improved liquidity conditions within the market.
With the Breakpoint conference underway, speculators saw a confluence of factors and attempted another short, a move reflected by rising open interest and a flip in funding rate at the time, providing fuel for a further squeeze up.
Along with strong organic spot volume, these shorts in anticipation of the asset liquidation proved to be risky as seen from the blowout with OI decreasing on $SOL’s pump to $46.80 and funding returning to normal.
Based on information from a recent asset filing and accounting for its recent ‘sell’ transfers, FTX still holds more than $3.5B in non-stablecoin assets, a fair portion denominated in locked $SOL that will unlock over the coming years.
FTX liquidators have thus far been methodical with their selling, choosing to sell when liquidity conditions are optimal. It is important to note as well that transfers to CEX may not necessarily equate to selling and OTC deals may have already been made for some of its assets.
Attempting to predict how the liquidators would act is not a simple task and caution should be taken when attempting to time a short on $SOL.