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In 2022, FTX collapse became one of the biggest news in the cryptosphere. As the exchange announced in the aftermath, customers and investors lost $8bn and $1bn respectively. It was a dire situation and sent shockwaves across crypto communities worldwide.
Fast forward to 2026 and Crypto market analyst Willy Woo has published a detailed breakdown of why altcoins underperformed Bitcoin from 2023 to 2025. Interestingly, his explanation centers not on market sentiment or macro conditions, but on a specific institutional trade born from FTX’s bankruptcy.
After the collapse, the restructuring team tasked with recovering funds for creditors set out to sell off the exchange’s assets. Among those assets were large amounts of Solana tokens that were locked and could not yet be transferred or sold on the open market.
Because there was no standard way to sell locked tokens, they created a workaround: buyers would pay upfront at a discounted price in exchange for the right to receive the tokens once they unlocked in the future. This was structured through legal agreements that effectively allowed FTX to sell the tokens before they became transferable.
I'm seeing crypto folk falling into the trough of dispair after an abysmal bull market with mainly losers and BTC outperforming their "beta".
Let me tell you a story that tells you why you got screwed. It starts with the end of FTX.
When the bankruptcy folk came in to liquidate…
— Willy Woo (@willywoo) March 25, 2026
As a result, FTX ended up selling 41 million Solana tokens at a 68% discount to institutional buyers. Galaxy and Defiance were among the biggest, picking up 25.5 million locked SOL at $64 per token when the market price was close to $192.
Funds that bought the discounted SOL weren’t simply betting on price appreciation. Many used a basis trade, a strategy designed to generate returns while minimizing price risk.
They bought locked SOL at a steep discount and simultaneously shorted the same amount of SOL in the futures market. If the price rose, gains on the tokens were offset by losses on the short. If the price fell, losses on the tokens were offset by profits on the short.
With price movements largely neutralized, the funds aimed to capture the discount, staking rewards, and short-position income as their primary returns.
Woo describes the outcome as a siphoning effect. The yield retail investors expected to earn from holding altcoins was quietly captured by institutional funds running this trade at near zero risk. The edge retail thought they had simply wasn’t there.
The trade was so profitable that funds went looking for the same setup elsewhere, and found it across the broader altcoin market.
Most crypto projects have backers and foundations holding large quantities of locked tokens. From 2023 onwards, those locked allocations were increasingly sold to hedge funds at discounts before vesting dates. The funds would then short the equivalent exposure on futures markets, effectively selling future supply into the market immediately, before retail ever saw the unlocks arrive.
When hedge funds shorted altcoins on futures markets, retail traders were on the other side of those trades, buying the same futures contracts the funds were selling. Retail participants thought they were gaining exposure to upside. In reality, they were absorbing the sell pressure the funds needed to lock in their yield.
Bitcoin dominance climbed between 55% and 60% during this period, running parallel to Bitcoin’s move past the $88,000 level by late 2025, while altcoins saw little sustained movement as perceived demand was absorbed in advance by institutional hedging activity.
Woo’s framing carries one forward-looking implication, though not an optimistic one for active traders. Many altcoin projects that appear to have locked supply overhangs have, in practice, already sold that supply through these discount deals.
The expected selling pressure on unlock dates may not materialize because the effective sale already happened. This removes a potential headwind, but it doesn’t automatically create new buying demand or a bullish tailwind.
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