Solana, until recently considered one of the cryptocurrencies with a promising future, is in the process of complete collapse.
The token has lost 61.6% of its value in the past seven days, according to the data firm CoinGecko. Solana (SOL) prices are now down 95% from their all-time high since November 6, 2021. Solana is currently trading around $14.12 from $259.96 in November 2021.
Solana’s collapse was due to the November 8 implosion of cryptocurrency exchange FTX, which filed for Chapter 11 bankruptcy three days later due to a financial crisis.
As a result, since November 8, the price of SOL has declined by 51.5%, translating into a loss of $5.5 billion in market value.
The failure of FTX and the failure of Solana affected the entire cryptocurrency market, which lost 17.6%, or $188.4 billion, since November 7.
Bitcoin, the most popular cryptocurrency, is down 22.4% in one week. Ether, the second largest cryptocurrency by market value, has fallen 24.4% in the past seven days.
Solana is a token issued by the Solana Blockchain that enables the development of decentralized finance or DeFi projects that offer financial services such as loans, mortgages, financial products, etc.
Relations with Sam Bankman-Fried
The cryptocurrency is linked to an on-chain cryptocurrency called project Serum, created by FTX founder Sam Bankman-Fried, who resigned on November 11 following the bankruptcy of his empire. Serum is a liquidity hub.
Serum is one of the foundations of the Solana DeFi infrastructure, as it is the protocol and ecosystem that provides Solana DeFi with high speed and low transaction costs. It implements central in the circuit limited order ledger and matching engine enabling liquidity sharing and offering powerful trading features to institutional and retail investors.
The serum is asset agnostic. It gives developers full control and flexibility to build trading applications that take advantage of the liquidity and benefits of the Serum ecosystem.
The ultimate vision behind Serum is to “drive global mass adoption of DeFi,” as stated on its website, “reaching 1 billion users and $10T in chain value.”
It handled more than $32 billion this year, according to data site Nomics.
But now that the blame has been cast on FTX, everything related to the exchange and its founder has been infected. The revelation that cash withdrawals amounting to hundreds of millions of dollars in cryptocurrency were illegally made to FTX after it filed for bankruptcy brought Serum and Solana into disrepute by association. Investors are wondering if the protocol could also be affected.
“Investigation of wallet movement anomalies related to consolidation of ftx balances between exchanges – unclear facts as other movements are not clear. We will share more information as soon as we receive it,” Ryan Miller, who is general counsel of FTX US, the American subsidiary of FTX, confirmed on Twitter.
He added that the company is doing everything to protect the remaining assets and limit the damage.
“Among other things, we are in the process of removing trading and withdrawal functionality and moving as many identifiable digital assets as possible to a new cold wallet custodian. As has been widely reported, unauthorized access to certain assets has occurred.’
Based on social media chatter, the developers are now looking to create a version of Serum that is independent of FTX and Bankman-Fried.