The collapse of FTX has had a particularly negative impact on the Solana ecosystem. Investors appear to be fleeing the area after its native SOL asset entered its worst times.
The relationships between Solana, FTX and Sam Bankman-Fried are complicated. But so important that Solana’s ecology was shaken by the fall of the exchange last week. The main concern is that investors could walk away and pull back their investments.
SOL has decreased more than 50% since the FTX crisis started on November 6 and is currently trading at $18.01, the bruised coin has fallen more than 93% from its peak, according to CoinGecko.
The founder of W3T, Alex Valaitis, expressed his reasoning for believing that Solana still has hope on November 16.
Let’s Get to the Bad News
The consequence of Solana’s long-standing criticism that it is centralized and VC-backed is currently painfully obvious. It is centralized since FTX and Alameda had 58 million SOL tokens or around 11% of the entire supply.
According to Valaitis, the amount of this that has been disposed of already and the amount that is subject to legal action are both unknown.
With TVL dropping 96% since its all-time high of $10 billion, DeFi on Solana has also taken a beating. Only $335 million in collateral is listed in DeFi on Solana, according to DeFiLlama.
Valaitis attributes much of this to SBF’s project Serum, a DEX. The developers are attempting to take FTX control away from Serum because several top dApps have stopped supporting it. Furthermore, the SRM token has dropped nearly 60% in the last two weeks.
DeFi coins wrapped in Solana and backed by FTX collateral have also been dumped.
Eventually, the Solana Foundation’s wealth was exposed to FTX. When withdrawals were stopped, about $1 million in assets were still on exchange.
The Solana Foundation also possesses 3.24 million shares of FTX Trading LTD ordinary stock, 3.43 million FTT tokens, and 134 million SRM tokens, according to an official document.
“The total exposure to Sollet-based assets on Solana in circulation is valued at approximately $40 million as of Nov 10, 2022,” it stated.
These additional issues come from the network’s ongoing performance and reliability issues with Solana.
Will Solana Recover?
For Solana, everything paints a bleak picture, but Valaitis offers encouragement for a positive outcome. According to its co-founder, the Solana Foundation still has a sizable treasury, which could survive for at least another two years.
Valaitis asserted that there is still a “strong developer community,” citing the most recent hackathon in Portugal as an illustration.
Solana still has a robust NFT ecology and it is still too early to write off the platform because of its significant network and web3 activity.
