Willy Woo: FTX Liquidation Spawns Locked Token Arbitrage Mechanism, Possibly Main Cause of Crypto Market Underperformance This Round

Deep Tide TechFlow News: On March 26, crypto analyst Willy Woo posted on X platform stating that the current market sentiment is subdued, and the overall performance of altcoins is poor. The main reason can be traced back to the asset liquidation mechanism created after the FTX bankruptcy, involving “discounted lock-up tokens trading + futures hedging.” During FTX’s liquidation process, a large amount of locked SOL was sold under a “pay first, deliver later” agreement. Due to limited liquidity, these sales often occurred at discounts exceeding 60%. Some hedge funds bought these tokens and used futures markets to short and hedge price risks, combined with staking yields and basis gains, achieving nearly risk-free returns of about 70%–80%.

This strategy then spread across the industry, with many project teams and their foundations selling lock-up tokens to hedge funds in advance. The hedge funds then used derivatives markets to hedge and release selling pressure, making it difficult for ordinary investors to earn excess returns. This has become a significant reason for the poor overall performance in this cycle. It also means that some projects’ nominal future unlock pressures have been pre-absorbed, and the actual selling pressure in the next bull market may be lower than expected. Ordinary investors in the crypto market find it hard to gain an advantage, so it is recommended to prioritize core assets like Bitcoin.