On October 11, Caroline Ellison, the former head of now-defunct Alameda Research, told a US court that she received instructions to sell Bitcoin (BTC) from FTX co-founder and CEO Sam “SBF” Bankman-Fried its price remained above $20,000.
This admission came as a shock to the entire crypto industry, but the two conspiring to depress BTC price and actually doing so are two different things.
While there is no information on the size or timing of these trades, the time frame is likely to be in September and October 2022, just weeks before the collapse of Alameda and FTX.
It is difficult, if not impossible, to determine whether Alameda acted effectively to push Bitcoin price below $20,000, as claimed by some analysts and traders. Nevertheless, the importance of FTX’s Bitcoin holdings compared to other exchanges and overall trading volume can be estimated.
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Currently, the only reliable publicly available information relates to the BTC wallets that previously formed the exchange’s reserves, which amounted to less than 47,000 Bitcoin as of September 2022, according to data from Glassnode. It is possible that Alameda Research had other addresses directly, but given the trading firm’s significant debt, it is unlikely that they had any cash reserves.
One should not assume that FTX has used its entire Bitcoin stack by users as the exchange continued to process customer withdrawals until its last day on November 8, 2022. An abrupt shift in these assets would have raised suspicion and potentially accelerated their bankruptcy. Still, it is worth examining the significance of FTX volumes and holdings.
Coinbase vs FTX monthly spot Bitcoin volume, USD. Source: CoinMetrics
In July 2022, FTX reported $30 billion in spot Bitcoin volume, averaging $1 billion per day. However, it is not advisable to rely on these numbers as the exchange has a history of manipulating data, which is evident in the fake insurance fund calculation method.
Assuming that the sales mentioned by Ellison occurred on FTX, an order for 4,000 BTC, valued at $80 million at the time, would represent just 8% of the exchange’s average daily volume. Additionally, when one takes into account the total Bitcoin volume from major exchanges, Alameda’s speculated order size becomes even more meaningless.
According to Messari’s “real volume” methodology, which excludes wash trading, total Bitcoin volume between September and October 2022 was less than $3.5 billion per day. Even if Alameda tried to sell 25% of its 47,000 BTC holdings in a single day, $240 million would represent only 7% of daily volume on major exchanges.
For comparison, in April 2022, MicroStrategy announced the acquisition of 4,167 Bitcoins at an average price of $45,714, for a total value of $190 million. This likely happened in late March when the price of Bitcoin rose 6% from $44,580 to $47,270.
Bitcoin Price Index (USD), March-April 2022. Source: TradingView
Two notable aspects of the price performance during the MicroStrategy acquisition stand out. First, the price fell below $46,000 on the same day as the official announcement on April 5, 2022. More importantly, the high of $48,000 appears to be consistent with the levels at which MicroStrategy completed its execution, resulting in an average price of $45,714.
However, looking at the bigger picture, Bitcoin was trading at around $39,500 in the two weeks prior to MicroStrategy’s activity and fell to $39,500 a few weeks later. There is no reason to believe that any single company could effectively depress the price for more than a week, be it Tesla dumping $936 million worth of Bitcoin or Alameda liquidating FTX customers’ deposits.
For context, Binance held 623,000 Bitcoin in reserves as of August 2022, while Coinbase had almost 690,000 BTC. These two exchanges together held almost 28 times more Bitcoin than FTX. This fact underlines the limited impact of the SBF and Caroline’s plan in terms of effective firepower.
Essentially, there may have been a few days where Alameda successfully applied pressure, resulting in their sales pushing the Bitcoin price below $20,000. However, given their reserves and price trends for similar sized orders, the event was unlikely to be significant when analyzing a period longer than a month.
This article is for general information purposes and is not intended as, and should not be construed as, legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect the views and opinions of Cointelegraph.
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