On October 11, the former head of Alameda Research, Caroline Ellison, revealed in a US court that she had received instructions from Sam “SBF” Bankman-Fried, the co-founder and CEO of FTX, to sell Bitcoin (BTC) if its price remained above $20,000. This admission sent shockwaves throughout the crypto industry, as it raised questions about potential market manipulation. However, it is important to note that while there was an alleged plan to suppress BTC price, there is no concrete evidence that it was actually carried out.
The exact details regarding the size and timing of these trades are unknown, but it is likely that they occurred between September and October 2022, just weeks before both Alameda and FTX collapsed. Determining whether Alameda effectively acted to suppress Bitcoin’s price is a challenging task, if not impossible. However, it is possible to assess the significance of FTX’s Bitcoin holdings in comparison to other exchanges and the overall trading volume.
The only reliable publicly available information is regarding the BTC wallets that constituted FTX’s reserves, which amounted to less than 47,000 Bitcoin by September 2022, according to Glassnode data. It is possible that Alameda Research held other addresses directly, but given the significant debt of the trading company, it is unlikely that they had any liquid reserves.
It is unlikely that FTX used its entire stack of Bitcoin from users, as the exchange continued processing client withdrawals until its final day on November 8, 2022. Abruptly moving these assets would have raised suspicion and potentially accelerated their insolvency. However, it is worth examining the significance of FTX’s volumes and holdings.
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In July 2022, FTX reported a spot Bitcoin volume of $30 billion, equivalent to an average of $1 billion per day. However, relying on these numbers is not advisable, as the exchange has a history of data manipulation, as evidenced by their falsified insurance fund calculation methodology.
If we assume that the sales mentioned by Ellison occurred on FTX, a 4,000 BTC order valued at $80 million at the time would represent only 8% of the exchange’s average daily volume. Furthermore, when considering the total Bitcoin volume from major exchanges, Alameda’s speculated order size becomes even more inconsequential.
According to Messari’s “real volume” methodology, which excludes wash trading, the aggregate Bitcoin volume was below $3.5 billion per day between September and October 2022. Even if Alameda attempted to sell 25% of their 47,000 BTC holdings in a single day, the resulting $240 million would only represent 7% of the daily volume across major exchanges.
For comparison, in April 2022, MicroStrategy announced the acquisition of 4,167 Bitcoins at an average price of $45,714, totaling $190 million. This likely occurred in late March, with Bitcoin’s price increasing by 6% during that period. The price dropped below $46,000 on the same day as the official announcement, and the peak of $48,000 corresponded to when MicroStrategy completed its execution.
When examining the broader picture, Bitcoin was trading around $39,500 in the two weeks leading up to MicroStrategy’s activity and decreased to $39,500 a few weeks later. This indicates that a single entity, whether it’s Tesla unloading $936 million worth of Bitcoin or Alameda liquidating FTX clients’ deposits, cannot effectively suppress the price for an extended period.
To provide further context, Binance held 623,000 Bitcoin in reserves in August 2022, while Coinbase had nearly 690,000 BTC. These two exchanges combined held almost 28 times more Bitcoin than FTX. This fact emphasizes the limited impact of SBF and Caroline’s venture in terms of effective firepower.
In essence, there may have been a few days where Alameda exerted pressure successfully, causing their sales to suppress Bitcoin’s price below $20,000. However, considering their reserves and the price action of similarly sized orders, the impact of their actions was likely insignificant when analyzing a period longer than a month.
It is important to note that this article is for general information purposes only and should not be taken as legal or investment advice. The views expressed here are the author’s alone and do not necessarily reflect the views of Cointelegraph.
