By Raphael Sanis
Edited by Charlie Mellor
Updated
The future of Solana (SOL) has been thrown into question after FTX’s bankruptcy and the collapse of Alameda Research – both major investors in the Solana blockchain.
Over the past year, Solana has raised funds from the FTX exchange and its former CEO Sam Bankman-Fried’s trading firm Alameda Research.
However, when Binance pulled out of its planned takeover of FTX it spooked investors, as it would mean the end of suppoort for SOL.
Despite Binance citing due diligence issues for its decision, SOL is now struggling after losing key investors.
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Alameda Research was an early investor in Solana and contributed to its private token sale in 2021, when the blockchain raised $300m from various private investors. This round was led by Andreessen Horowitz.
Bankman-Fried’s companies continued to work with the Solana blockchain. In March 2022, FTX collaborated with CoinShares to deliver a Solana-based exchange traded product (ETP). This new product shared Solana staking rewards with investors.
FTX was also a significant investor in the SOL cryptocurrency – its balance sheet included SOL worth more than $1.1bn, according to CoinDesk.
However, after the Binance deal was retracted, FTX filed for Chapter 11 bankruptcy and announced it would be closing all of its services.
FTX’s investment in and influence over Solana could now, however, be backfiring on the blockchain.
Before the Binance deal was withdrawn, Ran Neuner, a CNBC crypto trader, highlighted that the agreement would give Binance CEO Changpeng Zhao control over 10% of all SOL tokens.
Neuner tweeted: “And he would rather support BNB chain than SOL.”
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Solana getting killed. Market realizing that @cz_binance now owns 10% of the tokens and that he would rather support BNB chain than SOL. Also Solana just lost all the support and investment that FTX and @SBF_FTX were making in the ecosystem.
Neuner raised another point that is still relevant following Binance’s U-turn. After the collapse of FTX and Bankman-Fried’s trading firm, Neuner noted: “Solana just lost all the support and investment” from FTX and Bankman-Fried.
However, Solana is losing more than just potential funding from FTX. In a recent epoch, Solana validators unlocked more than 30 million SOL and flooded the market, according to Solana Compass.
Serum, a Solana-based decentralised finance (DeFi) protocol, has also been under fire. Investors have shown concern over the protocol as it is another product created by Bankman-Fried.
Users are now migrating from the DeFi platform and is total value locked (TVL) has plummeted from $121m on 6 November to just $400,000 at the time of writing, according to DeFi Llama.
The downfall comes as FTX reported an apparent hack, with the cryptocurrency exchange investigating $473m of lost funds. The news appeared to have shaken the confidence of Serum investors.
Anatoly Yakovenko, Solana founder, said Serum developers have forked the code to free the protocol from FTX.
Afaik, the devs that depend on serum are forking the program because the upgrade key to the current one is compromised. This has nothing to do with SRM or even Jump. A ton of protocols depend on serum markets for liquidity and liquidations.
SOL’s price has plummeted in recent days as investors jumped ship following the news about FTX. It opened at $36.77 on 6 November and then stooped to a low of $12.51 three days later.
As of 14 November 2022, SOL was trading at $14.19, down nearly 55% on the previous week.
The price collapse is having major consequences for larger SOL investors. A solana whale has been reported to be on the brink of liquidation as it holds more than $44m in debt.
However, at the time of writing, SOL had seen $615,000 liquidated in the past 24 hours, which was $5.7m less than BTC and $9.2m less than ETH, according to CoinGlass.
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