Solana’s Fall Accelerates: $50 Billion In Value Wiped From Cryptocurrency By 2022 – CNBC

The Solana logo displayed on a phone screen and the representation of cryptocurrency are seen in this illustrative photo taken in Krakow, Poland on August 21, 2021. Jakub Porzycki | NurPhoto | Getty Images Solana was touted as the cryptocurrency that would challenge ether with a greener approach, faster transaction speeds, and more consistent costs. Investors who made that bet had a miserable year. The token’s market capitalization collapsed from over $55 billion in January to just over $3 billion by the end of the year. eight counts of criminal fraud after his cryptocurrency exchange filed for bankruptcy last month. The disgraced former crypto billionaire was one of Solana’s most public boosters, touting the advantages of blockchain technology and investing more than $500 million in Solana tokens. “Sell me everything you want.” Bankman-Fried told a skeptic in January 2021. “Then fuck off.” Bankman-Fried companies held nearly $1.2 billion worth of tokens and associated assets in June, according to documents reviewed by CoinDesk. When FTX went under, investors bailed out Solana with a tune of around $8 billion. But in recent days, as the rest of the crypto world has been relatively quiet and prices stable, Solana has slumped further. . But the recent drops came after the news had already broken, making Solana’s recent drop a bit of a mystery. In the last week, Solana has decreased more than 30%. Ether has been flat, losing 1.7% in the same time frame, while Bitcoin has only fallen 1.2%. Among the 20 most valuable cryptocurrencies tracked by CoinMarketCap, the next biggest loser in that stretch is Dogecoin, which is down 9%. In just one hour of trading on Thursday, Solana fell 5.8%, bringing it to its lowest level since early 2021. around the time Bankman-Fried began trading. vocally Offer your support for the project. Solana has since broken out of the lows, with a market capitalization now crossing $3.5 billion. Its 24-hour trading volume increased by more than 200% in relative terms. During the height of the cryptocurrency market in 2021, Bankman-Fried was not alone in his optimism. scheduled directives, as well as an innovative proof-of-history consensus mechanism. Consensus mechanisms are how blockchain platforms assess the validity of an executed transaction, tracking who owns what and how well the system is performing based on a consensus across multiple registries. computers called nodes. Bitcoin uses a proof of work mechanism. Ethereum and its rival Solana use proof of stake. Instead of relying on energy-intensive mining, proof-of-stake systems ask large users to offer collateral, or stake, to become “validators.” Rather than solving a cryptographic hash, as with bitcoin, proof-of-work validators verify transaction activity and maintain the blockchain’s “books,” in exchange for a commensurate reduction in transaction fees. Solana’s alleged differentiating factor was increasing proof-of-stake. with proof of history: the ability to prove that a transaction occurred at a particular time. Solana skyrocketed throughout 2021, with a single token gaining 12,000% over the year and hitting $250 in November. However, even before FTX’s collapse, Solana faced a series of public fights that challenged the protocol’s claim that it was superior technology. Much of Solana’s popularity was based on the growing interest in NFTs. Serum, another Bankman-Fried-backed exchange, was built on top of Solana. When the schedule shifted to 2022, Solana’s limitations began to become apparent. Just a month into the year, a network outage left Solana without service for more than 24 hours. The Solana token fell from $141 to a low of just over $94. In May, Solana experienced a seven-hour outage after NFT minting flooded validators and crashed the network. A “record four million transactions [per second]removed Solana and caused its token price to drop 7%, CoinTelegraph reported at the time, pushing it further into the red during the onset of crypto winter. In June, another outage caused a 12% drop. The hours of downtime occurred after validators stopped processing blocks, immobilizing Solana’s promoted consensus mechanism and forcing a network restart. The outages were worrisome enough for a protocol looking to shake up ether’s dominance and assert itself as a stable and fast platform. Solana was experiencing growing pains in public. The project was first built in 2020 and is a younger protocol than ether, which went live in 2015. Technological challenges are expected. Unfortunately for Solana, something else was brewing in the Bahamas. The SEC called it “blatant” fraud. Bankman-Fried’s use of client money at FTX to finance everything from trading and lending at his hedge fund, Alameda Research, to his lavish Caribbean lifestyle, rocked crypto markets. Bankman-Fried was released on $250 million bail last week while awaiting trial on fraud and other criminal charges in the Southern District of New York. Solana since November 2022, the month FTX went bankrupt and filed for bankruptcy. 70% of the full value in the weeks after FTX filed for bankruptcy in November. Investors fled everything related to Bankman-Fried, and the prices of FTT (FTX’s native token), Solana, and Serum plummeted sharply. build something amazing that is decentralized.” Yakovenko did not immediately respond to CNBC’s request for comment. FTT has fared worse, losing virtually all of its value. But Solana has seen continued flight in recent days, reflecting ongoing concerns about FTX contagion and skepticism about the long-term viability of his own protocol. Developer flight is the most pressing concern. Solana’s raison d’être was to solve the struggle of bitcoin and ether “to scale beyond 15 transactions per second worldwide,” according to the developer’s documentation. But active developers on the platform have fallen to 67 from a high of 159 in October 2021, according to Token Terminal. Multicoin Capital, a cryptocurrency investment firm, has maintained a bullish stance on Solana. Even after the FTX implosion, Multicoin continued to strike a bullish tone about the suddenly beleaguered blockchain.” We acknowledged that SOL was likely to underperform in the near term given the affiliation with SBF.
and FTX; however, since the crisis began, we have decided to hold the position based on a variety of factors,” Multicoin wrote in a message to partners obtained by CNBC. Multicoin and other prominent crypto voices argue that the fallout from FTX underscores the need for a return to basics for the crypto industry: a transition away from giant centralized exchanges in favor of decentralized finance (DeFi) and self-custody. letter to the heart Not surprisingly, Yakovenko still believes in Solana. However, even Vitalik Buterin, the man behind ethereum, expressed his support for Solana on Thursday. “Hard for me to say from the outside, but I hope the community gets a fair chance to prosper,” Buterin wrote. On twitterChris Burniske, a partner at a Web3 venture capital firm, Placeholder, said he was “still pining” for Solana in a December 29 Twitter thread. Crypto saw massive adoption thanks to centralized platforms like FTX, Crypto.com, and Binance. FTX spent millions of dollars on stadium deals and naming rights. Crypto.com invested heavily in prominent advertising campaigns. Even Binance announced a sponsorship tie-in with the Grammys. 2023 may prove to be a pivotal year for defi, as crypto-curious investors seek safer ways to profit and keep their assets safe. Bitcoin was born out of the 2008 financial crisis. Now the cryptocurrency industry faces its own test.” Lehman was not the end of the banking industry. Enron was not the end of the energy industry.
And FTX will not be the end of the crypto industry,” Multicoin told investors. CNBC’s Ari Levy and MacKenzie Sigalos contributed to this report.