- Solana has shed 95% of its worth, falling from $54.5 billion to $4.4 billion
- Its affiliation with Sam Bankman-Fried has precipitated additional bearish value motion
- Prime tasks have fled the blockchain this yr, with concern over long-term way forward for Solana
For cryptocurrency buyers, the yr 2022 was one to neglect.
However even amongst all of the ache, followers of Solana have been damage greater than most. In the beginning of 2022, Solana was the fifth biggest crypto on the planet with a market cap of $54.5 billion. At this time, it’s sixteenth within the ranks, having shed over 95% from its peak, now value $4.4 billion.
What has occurred Solana?
Firstly, the apparent. The macro local weather has flipped immeasurably over the past yr. After a decade of basement-level rates of interest and a free-flowing cash printer, the Federal Reserve pulled the plug.
And similar to that, for the primary time in cryptocurrency’s brief historical past, it’s going through a bear market within the wider economic system. Through the explosive bull run of the prior decade, every little thing with a pulse loved dizzying returns. However now, the get together is over.
Having mentioned this, plotting Solana towards Bitcoin exhibits fairly how stark the underperformance has been.
Solana’s outages are an enormous downside
The primary downside is the incessant outages. I wrote in June about how Solana jogs my memory of my broken earphones. , nice once they work, however given I have to preserve twisting the earphone, disconnecting and reconnecting, with the intention to hearken to music, they’re not a lot good to me.
Solana is like these earphones. It has flexed its market-leading TPS and low-cost gasoline charges for some time, positioning itself as an “ETH killer”, and loved a flood of curiosity and lofty features in the course of the pandemic because of this.
In fact, as I mentioned above, this was throughout a interval of enlargement of all danger property, and due diligence within the cryptocurrency altcoin house was not precisely as granular because it ought to have been. There have been – and are – critical issues beneath the hood of Solana, because the outages have continued at a relentless tempo.
Riddle me this – how helpful is a blockchain if it incessantly switches off?
Again in that article from June, I wrote that “I’m getting slightly bored with utilizing the phrases ‘potential’, ‘may’ and ‘maybe’ relating to discussing Solana”. Since then, it has cratered one other 70% in value, with the market seeming to all however hand over on Solana’s hope of reaching relevance.
The rise of Layer 2s additionally threatens the core premise of Solana, attacking its core use case. Layer 2s work, which is an easy assertion that Solana merely can’t argue for itself proper now.
Sigh. It has been powerful over the past month to speak about something crypto-related and never point out the golden-knight-turned-arch-villain that’s Sam Bankman-Fried. However sadly, his demise has had dire penalties for Solana.
The disgraced founding father of FTX was a staunch early backer of Solana, with the token even displaying up on the much-publicised steadiness sheet of FTX because it desperately sought buyers on the final minute. Actually, Bankman-Fried was Solana’s greatest champion.
I am going to purchase as a lot SOL has you will have, proper now, at $3.
Promote me all you need.
Then go fuck off.
— SBF (@SBF_FTX) January 9, 2021
Critics now argue that SOL’s vertical rise in the course of the pandemic was partially brought on by Bankman-Fried’s interventions. The distribution of SOL tokens was additionally infamous for being VC-heavy, that means whale wallets had been more likely to have been in a position to affect its value considerably greater than different cryptos.
Within the close to two months since FTX’s implosion, Solana has struggled considerably greater than different cryptos.
Traders are fearful that a few of Bankman-Fried’s assist of SOL got here by way of fraudulent exercise, given the revelations round what occurred behind closed doorways at FTX. Caroline Ellison, Alameda CEO and shut confidant of Bankman-Fried, has said to the SEC that Bankman-Fired intentionally manipulated the FTT token. On this context, what’s to say that he didn’t do the identical for SOL?
Regardless, the mere affiliation with the fraudster has been sufficient to dent Solana’s prospects.
Initiatives and capital are leaving Solana
DeFi, the whole worth locked (TVL) on the Solana blockchain is now $217 million, in comparison with over $10 billion in late 2021.
Maybe much more regarding is the migration of tasks from Solana to rival blockchains. Outstanding NFT collections DeGods and y00ts introduced final week that they’re migrating to Ethereum and Polygon respectively, a hammer blow to the Solana devoted.
“There’s an argument to be made that (DeGods) has capped out on Solana,” DeGods mission chief and y00ts creator, Rohun Vora, mentioned in a Twitter Areas. “It’s exhausting to just accept, however it’s been powerful to develop on the charge we wish to develop. If Ethereum is the place we’ve got to go to continue to grow, it’s what we’ve got to do.”
The slide of Solana has been so stark that even its supposed greatest rival, Ethereum creator Vitalik Buterin, waded in to say some variety phrases. It speaks volumes about SOL’s fall, as it’s exhausting to even name it a rival of Ethereum any longer, given it’s not even within the high 10 of blockchains when it comes to TVL.
Some good folks inform me there’s an earnest good developer group in Solana, and now that the terrible opportunistic cash folks have been washed out, the chain has a vivid future.
Arduous for me to inform from exterior, however I hope the group will get its honest likelihood to thrive🦾🦾
— vitalik.eth (@VitalikButerin) December 29, 2022
Can it get better?
The query now’s whether or not all these issues are terminal. Can SOL bounce again? Effectively, the problem right here is two-fold. As Vitalik states, “the terrible opportunistic cash folks have been washed out”. This, whereas damaging SOL considerably as beforehand mentioned, does level in direction of a short-term downside.
Alternatively, there are myriad points which predate the Bankman-Fried saga and nonetheless stay issues. Solana’s market-leading TPS and low-cost charges are nice, however they arrive with a trade-off towards safety and stability, one thing customers have felt keenly over the past yr with the much-publicised points.
Personally, I feel Solana has a really tough street forward. For the complete altcoin house, the tide has gone out and it’s now evident how a lot these tasks had been valued primarily based on zero rates of interest and the FOMO frenzy of the pandemic. With inflation nonetheless excessive, a tenuous geopolitical local weather and plenty of extra bearish variables and uncertainty, the macro local weather gained’t change anytime quickly.
This makes any altcoin a dangerous guess. However for Solana particularly, which is combating an extra battle of a few of its greatest tasks abandoning it, its most well-known backer being a fraud and presumably manipulating its value, and a wave of detrimental sentiment, issues are notably murky.
I hope the builders preserve at it and the underlying potential does ultimately get delivered upon. However on this local weather, the catalysts for a value rise again to the place it was merely are merely not current proper now.