FTX Bankruptcy Liquidation's Unexpected Creation of a "Hedge Fund Harvesting Manual": Why Altcoins Lost to Bitcoin in Nearly Every Way from 2023-2025

FTX bankruptcy liquidation may be one of the biggest lessons in the crypto market in recent years, but its aftermath is far more profound than most people imagine. On-chain analyst Willy Woo recently explained the structural reasons why retail investors in cryptocurrencies almost entirely lost to Bitcoin between 2023 and 2025.

FTX Liquidation Invented a New Type of Asset Trading

When FTX’s bankruptcy administrators began liquidating assets, they faced a dilemma: a large amount of SOL tokens were locked on-chain and couldn’t be sold immediately. The solution was to sell these future receivable, locked-up tokens through legal agreements—buyers pay now, and delivery occurs later.

Data compiled by FTX creditor advocate Sunil shows that in three auctions in May 2024, 41 million locked SOL were sold:

Galaxy, Defiance: the largest buyers, purchasing 25.5 million locked SOL at $64 per token (market price at the time was about $192)

Funds like Pantera: bought at approximately $95 per token

Institutions like Figure: bought at about $102 per token

In other words, large funds acquired tens of millions of SOL at less than 60% of the market price. The maximum price of SOL reached $295 in January 2025, resulting in astonishing paper gains for these buyers.

How Hedge Funds Achieved “Almost Risk-Free 70-80% Returns”

Willy Woo points out that hedge funds acquiring discounted locked tokens weren’t betting on token price movements. Their strategy was:

• Shorting (selling futures) an equivalent amount of SOL to hedge against price volatility

• Earning staking yields and basis yield simultaneously

• Profiting from the discount itself

The result: price fluctuations had little impact on them, allowing them to lock in a nearly risk-free annualized return of 70-80%. Retail investors buying spot tokens effectively provided liquidity for these hedge fund short positions.

The FTX Model Is Being Replicated Industry-Wide

The bigger issue is that this pattern isn’t limited to FTX liquidation. Willy Woo notes that almost every crypto project has backers—venture capitalists and foundations—holding large amounts of locked tokens. After these tokens are sold to hedge funds, the funds short the tokens in futures markets, and retail investors’ “altcoin bull market dreams” are preemptively absorbed.

“All your alpha is flowing into hedge funds employing market-neutral strategies,” he says. “That’s why the crypto market performance from 2023 to 2025 is so poor—you’ve been sold off in advance.”

Why Bitcoin Remains Unscathed

Bitcoin has no foundation, no venture capital allocations, and no discounted locked tokens sold to hedge funds. Its supply schedule is transparent, unchangeable, and neutral to everyone. This is not just a narrative advantage but a structural one.

Willy Woo’s concise conclusion: “Just buy Bitcoin and keep living your life.” He also points out that because many projects’ locked tokens have already been sold off early in 2023-2025, the next bull market might have less selling pressure from these sources. However, for retail investors, this remains “insider information.”

This article, “How the FTX Bankruptcy Liquidation Created a Hedge Fund Harvesting Manual: Why Altcoins Almost Fully Lost to Bitcoin from 2023 to 2025,” first appeared on Chain News ABMedia.