Analyst: The lock-up token arbitrage mechanism driven by FTX liquidation may be the main reason for the poor market performance this round.

Gate News reports that on March 26, crypto analyst Willy Woo posted on X analyzing the reasons behind the current market downturn and poor performance of altcoins. Willy Woo pointed out that the core reason traces back to the asset liquidation mechanism created after the FTX bankruptcy, involving “discounted token lock-up trading + futures hedging.” During FTX’s liquidation, a large amount of locked SOL was sold under a “pay first, deliver later” agreement, often at over 60% discount due to limited liquidity. Hedge funds bought these tokens and hedged price risk through futures markets, combined with staking yields and basis gains, achieving nearly risk-free returns of about 70%-80%. Willy Woo believes this strategy then spread across the industry, with many project teams and their foundations selling locked tokens early to hedge funds, which used derivatives markets to hedge and release selling pressure. This made it difficult for ordinary investors to earn excess returns and was a significant reason for the overall poor performance in this cycle. Willy Woo stated that this means some projects’ nominal future unlock selling pressure has been pre-absorbed, and the actual selling pressure in the next bull market may be lower than expected. He recommends that ordinary investors in the crypto market find it hard to gain an advantage and should prioritize core assets like Bitcoin.