Why the Solana cryptocurrency is collapsing

Over the course of a year, the cryptocurrency closely linked to the giant FTX has lost more than 96% of its value. It trades today for less than $10.

At the end of the year, it is time to take stock of the world of cryptocurrencies. BFM Crypto has established a ranking of the 5 cryptocurrencies that exploded in 2022 and the 5 others that collapsed. This Thursday, zoom in on the cryptocurrency Solana, which circulates on the blockchain of the same name, whose balance is not very glorious.

Launched in March 2020, this blockchain wanted to facilitate access to decentralized finance (DeFi) by also allowing thousands of transactions per second. In just a few years, Solana has thus become a major competitor to the Ethereum blockchain, founded by Vitalik Buterin.

96% loss during the year

However, the year 2022 has dealt a blow to the Solana cryptocurrency and its ecosystem, with some analysts wondering if it will manage to recover. It must be said that the blockchain has chained misfortunes for some time, after the 6 collapses during the year, the crypto was weakened by the two cryptocrashes last May and June, it collapsed by 70% after the fall of the giant FTX . Over a year, the cryptocurrency has lost more than 96% of its value, according to Coinmarketcap. Since Wednesday, Solana has lost 10% of its value and has fallen below the $10 mark, far from its peak of … $260 on November 6, 2021. A threshold that worries investors a lot.

Why a sudden collapse of Solana? For the simple and good reason that this cryptocurrency is closely linked to the former head of FTX, Sam Bankman-Fried (SBF), today under house arrest pending trial. He is due in court next Tuesday.

For three years, SBF has actually invested millions of dollars in this crypto and its associated blockchain. Which was a huge publicity stunt for Solana until the FTX scandal broke. In fact, Solana was one of the star blockchain projects in the FTX-Alameda galaxy, along with the FTT cryptocurrency, which also collapsed.

“General confidence in Solana’s future has taken a hit given its close connection to SBF,” Martin Lee, a reporter at blockchain research firm Nansen, told Bloomberg.

Similarly, while it has been admitted that SBF manipulated the FTT cryptocurrency to benefit his company and Alameda Research, “it seems unlikely that Bankman-Fried did not also manipulate the price of Solana-based projects that he helped launch, where he controlled significant stakes and which he used in the accounting and loan fraud that formed the core of the FTX scam,” reports CoinDesk.

In addition, two major NFT projects, DeGods and Y00ts on the Solana blockchain, left the ecosystem to migrate to the Polygon ecosystem. Which is not very reassuring. Finally, the total value of cryptocurrencies circulating in decentralized finance (DeFi) protocols on Solana has drastically decreased from $10.2 billion on November 9, 2021 to less than $210 million today, a drop of nearly 98%.

Leave a Comment