24 February 2024
Shareholders are taken aback by the FTX crash. Big dealers have lost hundreds of millions of dollars as the global Crypto market has dropped by $1 trillion as a result of the occurrence. Additionally, it is having devastating repercussions on Solana (SOL) and other apparently unrelated programs.
Solana has had a rough month. According to statistics provided by CoinGecko, the fifteenth biggest Cryptocurrency by market capitalization has lost 41.2% of its value during the previous month. Solana's native currency, SOL, has fallen from $20.16 on November 9 to $14.24 today, bringing it the poorest performance amongst the top 100 Cryptocurrencies by market valuation. Based on this month’s trading, SOL has lost almost 94.5% of its value since reaching an all-time high of $259.96 in November 2021, as reported by CoinGecko.
When compared to its rivals, Solana is not much less desirable of an endeavor. It really has, in fact, been improving, with several positive developments and major announcements in recent times. Solana Mobile, the organization's cellphone division, is preparing to release the Saga smartphone, has worked with Alphabet's Google Cloud, and also is setting up a Web 3.0 retail outlet. Yet, the project's steep decline might be attributed to the fact that it is more dependent on FTX than was first disclosed to shareholders. The initiative is suffering much more as a direct consequence of FTX's financial difficulties.
What is Solana?
DeFi apps as well as NFTs may be built on the Solana blockchain, which is a PoS first-layered blockchain network. Solana is sometimes referred to as an Ethereum killer because of the fact that it provides formidable competition for Ethereum. With the unexpected demise of FTX, however, among its main supporters, this topic is in jeopardy. As the value of the native token plummeted by more than half in a single month, the value of SOL as a whole dropped by about $8.5 billion.
As the entrepreneur behind FTX as well as Alameda Research, Sam Bankman-Fried was an initial backer of Solana. However, following last month's rapid decline of those firms due to a liquidity crisis, investors speculated that Alameda might sell its more than $1 billion holding in SOL in a desperate attempt to get cash. As a result, there was a precipitous decline in the value of SOL due to a widespread selling trend.
Messari reports that investors fled SOL, causing its daily spot trading volume to plummet 85% from $1.31 billion in October to little about $196 million in November. As the asset's daily trading volume drops, it becomes worthless. Last month, investors cashed out their $89.474 million in Solana derivatives holdings, according to statistics from Coinglass. Towards the tune of $44.69M, long trades accounted for 49.94% of all positions liquidated.
Solana Prices Decrease before $900M Token Activation
There are other factors than the FTX announcement that might be dragging Solana downwards. The possibility that Alameda Research may flood the marketplace with SOL Cryptocurrency is unsettling. As Solana verifiers prepare to release a significant chunk of the overall SOL supply, concerns like these are understandably rising. As a matter of fact, Solana validators are about to release 49.6 million SOL from Solana's stake. When this happens, these coins will be available on the open marketplace for the initial time.. An astounding thirteen percent of the entire quantity of the currency is represented by this SOL, none of which have ever been traded. It would be nearly $900 million at today's exchange rates. At the conclusion of each epoch in the network, validators may withdraw their SOL stakes at any time they see fit. A lot of these verifiers seem to be nursing their injuries in light of the FTX announcement and deciding to cash out. While the Crypto community was still digesting the news of FTX's liquidity crisis and Binance's (BNB) following statement of intent to buy FTX, almost half of this SOL was due to be unlocked overnight.
What Caused SOL’s Downturn?
In addition to its links to FTX, the decline of the token may be traced primarily to a sharp decline in NFT activity based on the Solana platform. There's no denying the importance of NFTs to the early-year triumph of the network. Nansen reports that week over week use of all NFT platforms on Solana has decreased by almost 33%, from 122,410 users the month prior to 81,811 users today. Solana has absorbed the brunt of the FTX meltdown, but the whole Cryptocurrency market has suffered. Over the previous week, the market valuation of the sector has dropped by 8 percent, to little over $883 billion. Bitcoin (BTC) as well as Ethereum (ETH), two of the most prominent digital currencies, also have suffered losses of 9.7 and 7.5 percent, respectively, in November 2022.
Disclaimer: The author’s thoughts and comments are solely for educational reasons and informative purposes only. They do not represent financial, investment, or other advice.