What Is Going To Happen To Solana?

What happened to Solana?

Once one of the most popular blockchains, Solana, and its native coin SOL, suffered a major collapse. In November 2022, the market price of the coin updated its minimum mark ​​in a very short time. The price drop was about 70%. Application developers promptly began to leave the project amid the serious problems of the blockchain. 

Such popular DeFi protocols as Cashio and Mango Markets have left Solana. Lido and Solend projects have greatly reduced their assets on the blockchain.

What caused the collapse?

Problems with the blockchain and a sharp decline in the value of the SOL tokens began with the collapse of its largest partner and investor, the FTX exchange, and the venture capital fund Alameda that is associated with it.

Following the announcement of the owner of the FTX exchange and related companies about the impending bankruptcy, the Solana blockchain team published data on purchases of the SOL token by the FTX exchange and venture capital fund Alameda; the disclosed amount was equal to almost $700 million. This means that the SOL token ranked second in the portfolio of Alameda. The venture capital fund also actively participated as the main investor in many projects built on the Solana blockchain. Tokens of those projects where Alameda acted as the main investor also began to lose their value.

What is likely to happen next?

Investors and holders of the SOL tokens, who are waiting for the FTX's attempt to cope with the consequences of its conflict with the largest crypto exchange Binance, will start selling off their assets. Most of them will fall on the Solana blockchain cryptocurrency due to their large number in the portfolio. We are already observing this trend.

Also, some information appeared on the Internet concerning the liquidation by a large holder of the SOL coin in the amount of $51 million, which was used as a collateral position for a loan of USDC tokens in the total amount of $44.8 million. This news further accelerated the decrease in the value of the SOL coin. In addition, a large unlock of SOL coins from staking positions was expected; their owners could rush to sell the released coins in order to minimize their losses.

As the situation progressed, a decrease was recorded both in the activity of the blockchain’s users and in the number of transactions in the network. On top of that, the blockchain started experiencing technical issues and the blockchain status showed the message, “The Solana network is currently experiencing degraded performance.”

What are the prospects for Solana and SOL?

The prospects of the blockchain itself remain fundamental, the team continues its work. They will put efforts into fixing problems that cause regular crashes and keep improving scalability.

As for the recovery of the cryptocurrency’s value, it remains highly questionable, at least, in the short term. The bankruptcy of a large exchange FTX, the Alameda fund, and the decrease in the coin’s value may provoke a new round of bankruptcies of crypto projects associated with these issuers. There is a chance application developers will turn to more stable blockchain networks in order not to depend on the Solana network. Investors will likely avoid the SOL token after major losses until the project proves its independence.

SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.