Nov 15 (Reuters) – Solana, a poster coin of the crypto future, is in trouble.
The cryptocurrency, which had been hailed by FTX founder Sam Bankman-Fried, was hit harder than any other major coin by the exchange’s collapse.
The Solana, or SOL, token has fallen 53.8% since the furor began to unfold on November 2. In comparison, ether fell around 20% and bitcoin 19%.
“In the current crypto upheaval, the most unfortunate innocent victim is the Solana ecosystem,” said Stefan Rust, CEO of blockchain holding company Laguna Labs. He and several other crypto players said that FTX and sister company Alameda Research likely sold a large amount of the coin in an effort to stay afloat.
Many investors and app developers seem to be moving away from the Solana blockchain, which is widely used for decentralized finance apps; the number of SOL coins deposited there fell to 24.74 million, somewhere south of the 68.2 million seen in June, according to data from aggregator DeFiLlama.
FTX and Alameda Research did not respond to requests for comment. Solana co-founder Anatoly Yakovenko tweeted that development company Solana Labs does not hold any assets on FTX and has sufficient financial track for about 30 months. Another co-founder, Raj Gokal, said it was a “crucible” moment for the ecosystem, adding “every time we get stronger”.
Nevertheless, uncertainty looms over the blockchain which has been dubbed an “Ethereum killer” in the past due to its lower transaction fees, faster processing speed, and scalability potential.
“It’s not the end for Solana,” said Adam Struck of Struck Capital, a Los Angeles-based venture capital firm. “It has established itself as a thriving ecosystem and competitor to Ethereum. But do I think the valuation is a little foamy? Yes.”
Some see it as a silver lining.
“It’s far better for Solana that the connection with Sam Bankman-Fried’s empire ends now, even if the result is severe short-term pain,” said Jack Saracco, co-founder of digital banking and from payment solutions company Ping.
SOL’s market capitalization has shrunk by around 55% since Nov. 2, from $11.6 billion to $5.1 billion, according to data from CoinGecko. Ether’s market cap fell 21% to $150.7 billion, while Bitcoin’s fell 18% to $319 billion.
“BLOOD IN THE STREET”
The FTX saga began to unfold in early November when news website CoinDesk reported a leaked balance sheet that showed Alameda Research was heavily dependent on FTX’s native token, FTT. Reuters was unable to verify the report. See timeline.
The exchange filed for bankruptcy on Friday after traders rushed to withdraw $6 billion from the platform in just 72 hours and rival Binance scrapped a proposed bailout deal.
The company’s collapse saw over $190 billion wiped from the value of the overall crypto market.
“It’s what the ancients called ‘blood in the streets,'” said Martin Leinweber, digital asset product strategist at MarketVector Indexes. “There’s no Fed or Treasury here to support prices, so the market is just cleaning things up.”
Yet even amid the bloodshed, there was unexpected stability in stablecoins, which are pegged to the value of traditional assets such as the US dollar in an effort to reduce tame crypto volatility.
Although the largest stablecoin Tether briefly wobbled when it touched $0.985, according to CoinMarketCap, it managed to maintain its peg to the dollar, as did second-largest USDCoin.
“Most stablecoins performed within their normal volatility bands except for a few small algorithmic coins,” Leinweber added.
This is a reversal from earlier in the year when these coins, notably Tether, lost their pegs as the market was hit with volatility following the collapse of the stablecoin TerraUSD.
Some investors attributed the newfound resilience of stablecoins, often used to move funds between crypto and regular money, to greater transparency about their reserves.
“Everyone expected Tether to be the first to go down, but it’s not,” Saracco told Ping. “I think a lot of observers don’t realize how battle tested Tether is.”
Reporting by Medha Singh and Lisa Mattackal in Bengaluru; Assembly Pravin Char
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