Allegations of Bitcoin Price Suppression
In a surprising revelation, Caroline Ellison, the former head of Alameda Research, informed a U.S. court that she received instructions from FTX's co-founder and CEO, Sam "SBF" Bankman-Fried, to sell Bitcoin if its price remained above $20,000. While this admission has raised eyebrows in the crypto industry, it is important to distinguish between the intention to suppress Bitcoin's price and the actual execution of such actions.
Assessing the Significance of FTX's Bitcoin Holdings
Details about the size and timing of the trades instructed by Bankman-Fried are not available. However, it is likely that these trades took place between September and October 2022, just weeks before Alameda and FTX collapsed. To determine the impact of these trades, it is worth considering the significance of FTX's Bitcoin holdings in comparison to other exchanges and the total trading volume.
Bitcoin Wallets and FTX's Reserves
According to Glassnode data, FTX held less than 47,000 Bitcoin in its reserves by September 2022. It is possible that Alameda Research held additional Bitcoin addresses directly, but given the significant debt of the trading company, it is unlikely that they had any liquid reserves. It is important to note that FTX continued processing client withdrawals until its final day, indicating that they did not use their entire stack of Bitcoin from users.
FTX's Trading Volume and Data Manipulation
In July 2022, FTX reported a spot Bitcoin volume of $30 billion, equivalent to $1 billion per day on average. However, it is not advisable to rely on these numbers due to FTX's history of data manipulation, as evidenced by their falsified insurance fund calculation methodology.
Inconsequential Impact on Bitcoin Volume
If the sales mentioned by Ellison occurred on FTX, a 4,000 BTC order valued at $80 million would represent only 8% of the exchange's average daily volume. 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, the aggregate Bitcoin volume was below $3.5 billion per day between September and October 2022.
Comparison to Other Bitcoin Acquisitions
For comparison, in April 2022, MicroStrategy acquired 4,167 Bitcoins at an average price of $45,714, totaling $190 million. While the price dropped below $46,000 on the day of the announcement, there is no evidence to suggest that a single entity can effectively suppress the price for longer than a week. Binance and Coinbase, two major exchanges, held significantly more Bitcoin in reserves than FTX, further highlighting the limited impact of Alameda's actions.
Conclusion
While there may have been a few days where Alameda successfully exerted pressure and suppressed Bitcoin's price below $20,000, the event was unlikely significant when analyzing a period longer than a month. It is important to consider the context and the broader market dynamics when assessing the impact of such actions.
