- Solana lost 95% of its value, dropping from $54.5 billion to $4.4 billion.
- A relationship with Sam Bankman-Fried sparked even more bearish price action
- Concerned about Solana’s long-term future, top projects fled blockchain this year
For cryptocurrency investors, 2022 was a year to forget.
But amidst all the pain, Solana’s fans are hurting more than anyone else. At the beginning of 2022, Solana was his fifth largest cryptocurrency in the world with a market capitalization of $54.5 billion. Today, it sits at number 16 in the ranks, down more than 95% from its peak and is now worth $4.4 billion.
What’s wrong, Solana?
First, it’s clear. The macro environment has flipped immeasurably in the last year. After a decade of underground interest rates and free-flowing money printers, the Federal Reserve has pulled the plug.
Thus, for the first time in the short history of cryptocurrencies, we are facing a bear market in the broader economy. During the last decade’s explosive bull market, anything with a pulse enjoyed dizzying returns. But now the party is over.
That being said, plotting Solana against Bitcoin shows how drastic the performance dip is.
Solana’s outage is a big deal
The first problem is constant stalls. I wrote in her June about how Solana reminded me of my broken earbuds. Great when it works, but not so good for me considering I have to twist, unplug and replug the earbuds to listen to music.
Solana is like that earphone. For a while, he flexed his market-leading TPS and cheap gas rates to establish himself as an ‘ETH killer’, resulting in a flood of interest and huge profits during the pandemic. .
Of course, as I said above, this is a time when all risky assets are on the rise and the due diligence in the crypto altcoin space has never been as detailed as it should have been. was going on, there was a serious problem under Solana’s hood.
Trace this – how useful is a blockchain if it goes off too often?
Back in that article back in June, I wrote, “I’m a little tired of using the words ‘could’, ‘could’ and ‘probably’ when discussing Solana.” With prices up another 70%, the market appears to have all but given up on Solana’s hopes of achieving relevance.
The rise of Layer 2 threatens Solana’s core premise and attacks its core use cases. Layer 2 works. This is a simple statement that Solana currently cannot claim itself.
Ha. It’s been tough talking about crypto-related stuff in the last month. Golden He never mentioned Sam Bankman-Fried as he was a Knight turned arch-villain. Unfortunately, his death had dire consequences for Solana.
The disgraced FTX founder was an early loyal supporter of Solana, and the token even appeared on the widely publicized FTX balance sheet as it desperately sought investors at the last minute. In fact, Bankman-Fried was Solana’s greatest champion.
I’ll buy as many SOL’s as you have now for $3.
sell me everything you want
Then have intercourse.
—SBF (@SBF_FTX) January 9, 2021
Critics now argue that the vertical rise in SOL during the pandemic was partially caused by the Bankman-Fried intervention. The distribution of SOL tokens was also notorious for having many VCs. This means that whale wallets were likely able to influence the price more than other cryptos.
In the roughly two months since the FTX demise, Solana has struggled significantly more than other cryptocurrencies.
Investors fear some of Bankman-Fried’s support for SOL came through fraud, given the revelations about what happened behind closed doors at FTX. Caroline Ellison, her CEO of Alameda and a close friend of her Bankman-Fried, told the SEC that Bankman-Fired deliberately manipulated her FTT token. What does it mean in this context that he didn’t do the same for his SOL?
Regardless, a mere association with an impostor was enough to damage Solana’s prospects.
Project and funds leave Solana
Looking at DeFi, the total value (TVL) locked in the Solana blockchain is now $217 million, compared to over $10 billion in late 2021.
Perhaps even more concerning is the migration of projects from Solana to rival blockchains. His prominent NFT collections, DeGods and y00ts, delivered a blow to Solana’s followers last week by announcing that they would be migrating to Ethereum and Polygon respectively.
“There is an argument that (DeGods) has run out of Solana,” said Rohun Vora, DeGods project leader and creator of y00ts, on Twitter Spaces. “It’s hard to accept, but it’s been hard growing at the growth rate we wanted. If Ethereum is where we have to go to keep growing, that’s what we have to do. “
Solana’s slides are so grim that even its supposed arch-rival, Ethereum creator Vitalik Buterin, walked out to say a kind word. Considering that it is not in the top 10 blockchains in terms of TVL, it would be difficult to even call SOL a rival to Ethereum anymore, which speaks volumes about SOL’s decline.
Some wise people have told me that Solana has a serious and enlightened developer community and that the chain has a bright future now that the awful opportunistic money people have been washed away.
I don’t know from the outside, but I hope the community gets a fair chance to thrive 🦾🦾
—vitalik.eth (@VitalikButerin) December 29, 2022
Can you recover?
The question is whether all these issues are apocalyptic. Can SOL recover? Well, there are two problems here. As Vitalik puts it, “The terrible opportunistic money people were washed away.” This shows a short-term problem, although as mentioned earlier he does a lot of damage to SOL.
On the other hand, there are a myriad of problems that existed before Bankman-Fried and are still problematic. Solana’s market-leading TPS and low rates are great, but come with tradeoffs between security and stability. This is something users have come to realize last year with a widely publicized issue.
Personally, I think Solana has a very difficult road ahead. The tide has turned off across the altcoin space, revealing just how much these projects have been valued based on his FOMO frenzy due to zero interest rates and the pandemic. With still high inflation, a tenuous geopolitical climate, and many bearish variables and uncertainties, the macro environment is unlikely to change anytime soon.
This makes any altcoin a risky bet. But Solana, in particular, has seen some of its biggest projects abandon it and its most famous proponents fraudulent, possibly manipulating its prices and battling a wave of negative sentiment.
I hope the developers keep it up and the underlying potential is eventually realized. Is not.