Solana, the blockchain once championed by Sam Bankman-Fried, is once again in the spotlight. Industry watchers are questioning whether her past close ties to the sleuth crypto tycoon and FTX will jeopardize her future. The founders of Solana are doing everything they can to break this bond.
The price of the SOL token has fallen by 96% from a record high of $260 in November 2021 to $10 due to the year-long cryptocurrency crisis and the fall of FTX. On Wednesday, SOL fell by 12% as large holders began to divest themselves of the cryptocurrency, which caused a wave of selling.
Anatoliy Yakovenko, co-founder of Solana Labs Inc., a startup that developed the blockchain, previously said he doesn’t usually comment on price, preferring instead to focus on the technology and getting people involved, creating something awesome and decentralized. But the collapse of FTX has affected the blockchain and its founders – the fall of the token can be seen as an expression of declining confidence in a platform that once had a market value of nearly $80 billion.
Before FTX’s bankruptcy and Benkman-Fried’s arrest in December on charges that included several types of fraud, he was a major proponent of Solana, a blockchain billed as a faster and more efficient alternative to the market-leading Ethereum network. Bankman-Fried appeared with Yakovenko at conferences and virtual conversations by the fireplace.
According to Yakovenko, the FTX collapse affected only 4% of their projects and about 80% of Solana’s team had nothing to do with the failed exchange at all, adding that it connects hard-hit founders with investors who can potentially provide emergency capital.
However, the network’s long-standing ties to FTX and Alameda Research, which Bankman-Fried co-founded, could make it difficult for some investors to exit SOL. The two firms helped support Solana by buying SOL tokens in bulk from the Solana Foundation, a non-profit organization that helps support the blockchain. Alameda also bought a large amount of SOL from Solana Labs.
In total, transactions between FTX and Alameda, as well as the Solana Foundation and Solana Labs, involved 58086686 SOL tokens. This amount is equivalent to more than $580 even at the current price of the token. Alameda and FTX’s venture arm also invested in several projects that worked for Solana. Many investors first heard about Solana when FTX became interested in the blockchain and started promoting it.
FTX US, the US branch of the crypto exchange, launched its NFT trading platform on Solana last year, despite Ethereum being the preferred blockchain for many NFT projects. The trading platform is no longer operational and the NFT links created on the platform are now “dead” as well.
The Solana Foundation said it had less than $1 million in cash or cash equivalents on FTX.com as of Nov. 6, when FTX stopped withdrawing funds, which management allegedly did not know about. These assets are partially stuck on the stock exchange. Solana still has no clarity on what will happen to the assets as the bankruptcy process progresses, but they are said not to affect the security and stability of the blockchain.
Crypto projects are already leaving Solana: DeGods and y00ts, two prominent NFT projects, are moving to Ethereum and Polygon, respectively. Serum, a decentralized exchange linked to Solana and backed by FTX, found itself in dire straits after the latter’s collapse. A new version of the platform, called Openbook, was launched with a blockchain update via the Solana fork.
The management of Solana and Serum are making optimistic statements, talking about the decline of noise around FTX as an encouraging factor, but the facts so far point to a loss of investor confidence in FTX-related entities.
FTX and Alameda Platform May Be Involved in UST, Luna and Bitcoin’s 29% Collapse – NYT and Bloomberg Learn US Attorney’s Investigation
Source: Bloomberg
