Did SBF and Caroline Ellison Succeed in Keeping Bitcoin Under $20K?

On October 11th, Caroline Ellison, the former head of the now-defunct 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 (BTC) if its price remained above $20,000.

This news came as a surprise to the whole crypto industry, but there is a difference between conspiring to suppress BTC price and actually doing it.

Although there are no details available regarding the size and timing of these trades, it is likely that the timeframe falls within September and October 2022, just weeks before Alameda and FTX collapsed.

It is complicated to determine whether Alameda effectively acted to suppress Bitcoin’s price below $20,000, as some analysts and traders have alleged. However, it is possible to assess the significance of FTX’s Bitcoin holdings in comparison to other exchanges and the total trading volume.

Look at the Bitcoin wallets

Glassnode data suggests that by September 2022, Alameda Research’s BTC wallets held less than 47,000 Bitcoin. It’s possible that they had other addresses, but due to the company’s considerable debt, it’s unlikely that they had any liquid funds.

It’s not advisable to trust FTX’s volume numbers as they have been known to manipulate their data, such as with their insurance fund calculation methodology.

In July 2022, FTX reported a spot Bitcoin volume of $30 billion, or $1 billion daily on average. But if the sales that Ellison mentioned occurred on FTX, a 4,000 Bitcoin order, valued at $80 million, would be a mere 8% of the exchange’s average daily volume. Furthermore, when taking into account the total Bitcoin volume from major exchanges, Alameda’s speculated order size is even less significant.

Messari’s “real volume” methodology, which excludes wash trading, shows that the aggregate Bitcoin volume was below $3.5 billion per day between September and October 2022. Even if Alameda tried to sell 25% of their 47,000 BTC holdings in one day, that $240 million would only make up 7% of the daily volume across major exchanges.

For comparison, MicroStrategy’s acquisition of 4,167 Bitcoins at an average price of $45,714, totaling $190 million, in April 2022 is noteworthy. This likely took place in late March and Bitcoin’s price increased by 6%, from $44,580 to $47,270.

The price dropped below $46,000 on the day of the announcement and the $48,000 peak appears to be the level where MicroStrategy completed its purchase. But looking at the bigger picture, Bitcoin was trading around $39,500 in the two weeks prior to MicroStrategy’s activity and decreased to $39,500 a few weeks later.

It is highly unlikely that a single entity could effectively suppress the price for longer than a week, regardless of whether it’s Tesla unloading $936 million worth of Bitcoin or Alameda liquidating FTX clients’ deposits.

Binance held 623,000 Bitcoin in reserves in August 2022, while Coinbase had nearly 690,000 BTC. These two exchanges combined had almost 28 times more Bitcoin than FTX, which illustrates the limited effect of SBF and Caroline’s venture in terms of firepower.

In conclusion, it is possible that Alameda managed to push the price down below $20,000 for a few days. However, taking into account their reserves and the price action of similarly sized orders, the event was likely insignificant when looking at a period longer than a month.