- Solana is in the line of fire over-involvement with Sam Bankman-Fried.
- How far the once competitor for Ethereum has fallen.
- Could Solana make it out?
Sam-Bankman Fried and the collapse of FTX had a hand in a significant shift that occurred in the crypto market for the last two months of the year, as not only did millions get lost through SBF’s financial fraud, but the exposure to FTX was also responsible for taking down several crypto exchanges. It also contributed to a significant strictness in crypto regulations in several countries. The FTX financial scandal also had a hand in causing the plummet of cryptocurrencies, with it de-pegging even USDT. Solana was also caught in the fire of the FTX drama.
Earlier this year, Solana was seen as a competitor for Ethereum, it had rapid growth between 2020 and 2021 and the early months of 2022, where it had seen immense hype from the bullish market, particularly from the side of venture capitalists but lately, Solana has recorded a massive departure of its significant projects onto other chains, with a considerable drop in its total value, the competition that comes from Ethereum’s layer 2s represents an ever-growing threat to Solana’s core premise of a blockchain with faster and lower cost transactions.
However, the major downfall for Solana is coming in the form of its exposure to FTX by way of the former CEO Sam Bankman Fried, who was one of the most vocal and prominent backers of Solana, with rumors of the former FTX CEO being a part of price appreciation of Sol tokens and other related assets through his advocacy and interests in the token.
So when Sam Bankman was outed for his fraud, the general public cast suspicion on Solana, with questions as to the extent of their involvement with him; the skepticism displayed by the crypto market has had a significant effect on Solana, as it went from a peak of $258.78 in 2021 to just a little over $10, which records a drop of 96% which is at least 20% higher than the drop of even BTC and ETH, even recording a shaper drop than Dogecoin has experienced. Solana went from the position of the fifth most valuable token in the early days of November to the 19th place, according to information from CoinGecko.
The value of tokens staked in DeFi Protocols on Solana has also taken a significant hit from a whopping $10.2 billion as of November 2021 to a downward price of $210 million at its last press time, which is a substantial decline of 98%. It has now gone to the position of the 12th largest DeFi chain by total value.
Solana’s highest percentage drop came in the early days of November after FTX’s collapse when it became apparent how much the former CEO had been backing the chain with funds from FTX, which had been gotten from the theft of customer funds. This is also added to suspicious that were already surrounding Solana before the collapse of FTX as the chain had previously experienced repeated halts since its creation, which were often caused by spam overwhelming it, which is linked to the chain’s core value proposition as a cheaper, faster layer one than its former competitor Ethereum, as lower transaction costs and a higher speed of transaction are often seen as a trade-off for security and scalability for blockchains.
The chances of Solana coming out of this entire situation on top seem even slimmer by the day. With how much the cases against Sam Bankman continue to unfold, it will garner more suspicion on just how far he had a hand in the rapid growth that the network experienced, especially with the cases piled up on SBF for misusing customer funds, even if there is no concrete evidence that SBF indeed gave them an unfair advantage, the suspicious and charged led against him plus the general panic mode surrounding the crypto space will work against Solana, it may be hard for them to rise from this.
Solana may be able to remove itself from the line of fire it has been put in due to its proximity to Sam Bankman-Fried. However, it may take a while as the crypto market is currently in a precarious state with all the collapses, even to crypto giants that were viewed with an eye for stability.
Solana was also already affected by the harsh crypto winter. The exposure to FTX just doubled the trouble the network found itself in.