SBF and Caroline Ellison conspired to keep Bitcoin under $20K, but did it work?

On Oct. 11, Caroline Ellison, the previous head of the now-defunct Alameda Analysis, knowledgeable a U.S. courtroom that she obtained directions from FTX’s co-founder and CEO, Sam “SBF” Bankman-Fried, to promote Bitcoin (BTC) if its value remained above $20,000. 

This admission got here as a shock to your complete crypto business, however the two conspiring to suppress BTC value, versus really doing it are two various things.

Whereas there are not any particulars obtainable concerning the dimensions and timing of those trades, the timeframe probably falls inside September and October 2022, simply weeks earlier than Alameda and FTX collapsed.

Figuring out whether or not Alameda successfully acted to suppress Bitcoin’s value beneath $20,000, as alleged by some analysts and merchants is difficult, if not unattainable. Nonetheless, it’s doable to evaluate the importance of FTX’s Bitcoin holdings compared to different exchanges and the overall buying and selling quantity.

Have a look at the Bitcoin wallets

At the moment, the one dependable publicly obtainable data pertains to the BTC wallets that beforehand constituted the trade’s reserves, amounting to lower than 47,000 Bitcoin by September 2022, in accordance with Glassnode information. It is doable that Alameda Analysis held different addresses straight, however given the substantial debt of the buying and selling firm, it is unlikely that they had any liquid reserves.

One mustn’t assume that FTX used its whole stack of Bitcoin from customers because the trade continued processing shopper withdrawals till its last day on Nov. 8, 2022. Shifting these property abruptly would have aroused suspicion, probably accelerating their insolvency. Nonetheless, it is worthwhile to analyze the importance of FTX volumes and holdings.

As of July 2022, FTX reported a spot Bitcoin quantity of $30 billion, equal to $1 billion per day on common. Nonetheless, counting on these numbers is just not advisable, given the trade’s historical past of information manipulation, as demonstrated by their falsified insurance coverage fund calculation methodology.

Assuming the gross sales talked about by Ellison occurred on FTX, a 4,000 BTC order, valued at $80 million on the time, would symbolize solely 8% of the trade’s common every day quantity. Moreover, when contemplating the overall Bitcoin quantity from main exchanges, Alameda’s speculated order dimension turns into much more inconsequential.

Based on Messari’s “actual quantity” methodology, which excludes wash buying and selling, the mixture Bitcoin quantity was beneath $3.5 billion per day between September and October 2022. Even when Alameda tried to promote 25% of their 47,000 BTC holdings in a single day, that $240 million would symbolize solely 7% of the every day quantity throughout main exchanges.

For comparability, in April 2022, MicroStrategy introduced the acquisition of 4,167 Bitcoins at a mean value of $45,714, totaling $190 million. This probably occurred in late March, with Bitcoin’s value growing by 6%, from $44,580 to $47,270.

Two notable elements of the value motion throughout MicroStrategy’s acquisition stand out. First, the value dropped beneath $46,000 on the identical day because the official announcement on April 5, 2022. Extra importantly, the $48,000 peak seems to correspond to the degrees the place MicroStrategy accomplished its execution, ensuing within the $45,714 common value.

Nonetheless, when analyzing the broader image, Bitcoin was buying and selling round $39,500 within the two weeks main as much as MicroStrategy’s exercise and decreased to $39,500 a number of weeks later. There isn’t a cause to imagine {that a} single entity may successfully suppress the value for longer than every week, whether or not it is Tesla unloading $936 million value of Bitcoin or Alameda liquidating FTX purchasers’ deposits.

To supply some context, Binance held 623,000 Bitcoin in reserves in August 2022, whereas Coinbase had practically 690,000 BTC. These two exchanges mixed held virtually 28 occasions extra Bitcoin than FTX. This truth underscores the restricted impression of SBF and Caroline’s enterprise when it comes to efficient firepower.

In essence, there might have been a number of days the place Alameda exerted stress efficiently, inflicting their gross sales to suppress Bitcoin’s value beneath $20,000. Nonetheless, contemplating their reserves and the value motion of equally sized orders, the occasion was unlikely important when analyzing a interval longer than a month.