Bankrupt Crypto Exchange FTX Seeks to Protect Assets through Hedging and Staking With Galaxy Digital
FTX Seeks to Protect Assets
FTX, the crypto exchange currently undergoing bankruptcy proceedings, is pursuing strategies to safeguard its remaining assets according to recent court filings.
The company’s legal team has requested permission from the bankruptcy court to engage in activities such as hedging and yield generation using its idle cryptocurrency holdings.
As part of its “Digital Asset Management and Monetization Programme,” FTX plans to work with Mike Novogratz’s Galaxy Digital as its investment adviser. FTX intends to generate and protect value through these arrangements because a sizable percentage of the funds are now held in cryptocurrencies, including about $3.4 billion out of the $6.2 billion available for stakeholder recovery.
FTX plans to develop hedging arrangements to reduce exposure to unfavorable price changes in cryptocurrencies, especially Bitcoin and Ethereum. According to the legal document, “hedging of Bitcoin and Ether—two digital assets for which there is a liquid hedging market—will provide a means to lessen the Debtors’ exposure to adverse price movements in Bitcoin and Ether prior to their sale.”
Through derivative trading, risk management, and staking, which involves locking tokens within a network to earn passive interest, the idle crypto assets will be used to create yield. However, these strategies are constrained by restrictions, some of which need the consent of the exchange’s victims.
FTX’s pursuit of innovative strategies to protect its assets while in bankruptcy is novel, even within challenging circumstances.