The Funding: FTX’s discounted tokens keep drawing investor interest

The FTX estate's discounted token sales continue to attract attention. Investors have snapped up millions of tokens across multiple projects, betting that these assets are undervalued and could offer long-term upside. I recently scooped the details on the estate's token sales involving Worldcoin (WLD) and Metaplex (MPLX), while my colleague Tim Copeland broke the news on Solana (SOL) token sales earlier this year.

SOL was FTX's largest holding, with 41 million locked tokens, currently valued at around $6 billion. The estate sold these tokens in batches during April and May at a significant discount, ranging from $64 to $110 per token. With SOL now trading around $142, investors who bought the tokens from the estate, like Pantera Capital, Galaxy Trading and Figure Markets, are already seeing paper profits. Over the past year, SOL has surged by 527%, rebounding from its lows of around $10 following FTX's collapse in November 2022.

"We're only interested in buying assets from bankruptcy estates that we think are super high quality, that we want to own for the long term, and that we think have meaningful upside from here," Cosmo Jiang, portfolio manager at Pantera Capital, told me.

Jack Platts, founder of Hypersphere Ventures, echoed. He said, "We're fundamental-based investors, and we're looking for projects led by visionary founders that have high distribution potential to bring on the next tens of millions of users. So whenever opportunities arise, such as distressed sellers, we're interested in exploring them to see if any align with our fundamental view on crypto adoption." Hypersphere has invested in "several" tokens sold by the FTX estate, Platts said, but declined to name them or disclose the purchase prices. Notably, Hypersphere is an early investor in Worldcoin, having backed its $25 million Series A round in 2021.

The lure of FTX's discounted tokens

As I reported earlier this week, along with Tim, the FTX estate planned to auction 22.3 million locked WLD tokens, valued at approximately $38 million, at a discounted rate. These tokens will unlock daily through 2028. However, a couple of sources expressed concerns about the length of the lockup periods for the WLD tokens. Additionally, while Figure Markets initially intended to purchase the WLD tokens, they ultimately chose not to bid due to concerns about the token's limited float and the perceived expectations from the estate, a source informed us at the time.

Despite these concerns, the WLD sale turned out to be quite competitive. A source with direct knowledge of the matter informed me that the auction saw WLD selling "in the low $1s." Currently, WLD is trading around $1.78, having peaked at about $11.75 in March this year. Worldcoin, co-founded by OpenAI's Sam Altman, aims to tackle the global identity challenge in the world of artificial intelligence. WLD investors appear to be placing their bets on Altman, who has transformed OpenAI into one of the most valuable startups ever, achieving a $157 billion valuation in its latest record venture capital round of $6.6 billion earlier this week.

Last month, I also reported that the FTX estate sold its MPLX tokens to Wave Digital Assets, from which several crypto funds, including Pantera Capital and ParaFi Capital, subsequently acquired those tokens at a discount. The FTX estate originally held 72.6 million MPLX tokens; of those, 62.6 million were sold privately over the past several months, representing the entire block of unlocked MPLX held by the estate at that time. Additionally, 2.5 million tokens were moved from the FTX wallet in August, leaving only 7.5 million tokens available for sale.

The FTX estate still has a couple of well-known tokens remaining, including Wormhole and Pyth, both of which are "pretty large" in size, a source with knowledge of the matter told me. According to Arkham data, the estate's largest remaining holding is FTX's native FTT token, currently valued at around $675 million, but the token is highly illiquid and may not get sold since the estate marked it to zero. The source told me they don't expect the estate to sell FTT through an auction process, and if they do, it's unlikely they'll receive much value.

Still, FTT has surged nearly 100% over the past 30 days. However, the maximum 24-hour trading volume of the token was around $360 million, significantly lower than the paper value of the estate’s FTT tokens, which stands at about $675 million according to Arkham. "It must be trading like a meme," Hypersphere's Platts told me.

Overall, the allure of discounted tokens and the potential for gains make these investments a risk worth considering for many.

Source : The Block Crypto News - Oct 6, 2024