Key Takeaways

• The collapse of the FTX crypto alternate is having a ripple impact on the whole crypto trade; casualties pile up because the chapter proceedings start.
• Sam Bankman-Fried (SBF) supported the Solana blockchain and used it to construct his personal decentralized alternate.
• Whereas Solana was as soon as poised to be a menace to Ethereum, the blockchain has seen SOL, its native token, plummet in worth resulting from macroeconomic components and scandals which have introduced down the whole crypto ecosystem.

It doesn’t really feel prefer it was so way back after we noticed Sam Bankman-Fried on the duvet of so many magazines touting his plan to donate nearly all of his wealth. Many people thought-about SBF to be the final word “Crypto Robin Hood.”

SBF was additionally pushing many different initiatives within the cryptocurrency area. A type of secondary ventures he promoted was the Solana blockchain.

The Solana blockchain is understood for providing a platform with fast transaction occasions and cheap charges. Solana was speculated to be an “Ethereum killer” however that hasn’t occurred, and it gained’t.

Solana noticed its native token SOL drop by at the very least 30% at occasions after the FTX collapse since SOL was Alameda’s second-largest holding. We’ll have a look at the Solana cryptocurrency outlook within the wake of the FTX chapter.

What occurred to FTX?

Earlier than evaluating the Solana, we should handle what occurred with FTX. The crypto alternate had a valuation of $32 billion at the beginning of 2022 with a slew of high-profile movie star endorsements. Most individuals within the crypto neighborhood thought it was too huge to fail.

When a report revealed that FTX didn’t have the correct funds in reserves, clients rushed to money out their investments since they have been rightly nervous it will be the subsequent crypto platform to go bankrupt. In flip, this led to a liquidity crunch.

When it got here out that Binance, a rival crypto alternate, would not buy the alternate in a last-ditch effort to put it aside, FTX had no alternative however to file for chapter safety on November 11.

Bankman-Fried was usually hyping up Solana. The bankrupt alternate even had $982 million in SOL, the native cryptocurrency of the Solana blockchain. There have been fears that FTX and Alameda Analysis would begin unloading SOL tokens to lift liquidity.

The FTX meltdown has had a big influence on the general cryptocurrency area. Investor confidence is low. Traders concern additionally grew round initiatives related to SBF and FTX given the doable fallout from the chapter proceedings.

What’s the connection between SBF and Solana?

Through the summer time, SBF carried out an unique interview with Fortune journal. In it, he shared that he felt Solana was essentially the most underrated token. The story talked about how SBF’s counterintuitive investing technique would both construct him an empire or finish in a catastrophe.

The latter occurred and SBF at present sits behind bars.

SBF hyped Solana and the community for years, each personally and professionally. When Solana Labs raised $314.2 million in the summertime of 2021, Alameda Analysis, a crypto hedge fund based by SBF himself, invested closely.

SBF additionally began constructing a decentralized alternate referred to as Serum on the Solana blockchain. It was identified to many within the crypto area that SBF had invested loads of cash by way of his firms in SOL tokens.

Whereas SOL was Alameda’s second largest funding, the buying and selling agency additionally actively invested in different initiatives on the blockchain. Alameda invested in Serum (SRM), MAPS (MAPS), and Ogyxen (OXY) through the Solana blockchain.

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How did FTX influence Solana?

After loads of hypothesis, the staff at Solana launched a weblog put up that addressed the monetary ties between Solana, FTX, and Alameda Analysis. The Solana Basis confirmed that they’d about $1 million value of money or equal property on the FTX platform as of November 6.

This was across the time when FTX needed to pause buyer withdrawals because it grew to become clear that they didn’t have the funds. These funds are actually caught on FTX and are pending the outcomes of what occurs subsequent with the chapter process.

The Solana Basis reported that these funds are equal to lower than 1% of the funds, so it’s not a dire scenario.

In accordance with Solana Compass, the Alameda Analysis liquidators now possess tons of of thousands and thousands of {dollars} value of SOL. Primarily based on the report, Alameda Analysis beforehand had management of 48,636,772 SOL tokens, that are value about $643,000,000 now.

Nevertheless, the weblog put up from the staff at Solana talked about that FTX and Alameda bought over 50.5 million SOL from the inspiration. They wrote that a good portion of the SOL could be locked up in month-to-month unlock schedules till 2028.

Are you totally confused? It’s unattainable to invest what is going to occur with these SOL tokens in the course of the chapter proceedings. Moreover, the article that Solana launched additionally confused how the FTX collapse did not influence the safety of the blockchain.

What occurred to Solana?

Solana, together with each different main cryptocurrency token, has been hit onerous by macroeconomic components impacting the whole area, negatively.

Final November, the worth of ether peaked at practically $4,900, whereas bitcoin hit virtually $69,000. Then it grew to become clear that inflation was hovering, which meant that the Fed must elevate charges to chill off the financial system.

As a substitute of performing as a hedge towards inflation, it turned out that cryptocurrency was one other speculative asset that might fluctuate primarily based on macroeconomic situations.

The worth of SOL is hovering round $14.00 as of mid-December, which is down over 91% for the 12 months and drastically decrease than the all-time excessive of $259.99.

What’s subsequent for Solana and Crypto?

Quite a few components are at play right here, and plenty of crypto fans are bracing themselves for an prolonged crypto winter.

For starters, we’ve got to see how the chapter proceedings play out. Then we even have to attend and see to find out the influence of the speed hikes from the Fed, working to chill down inflation.

We will anticipate two issues for Solana and crypto basically.

Extra worth volatility

It’s secure to say that as extra information comes out in regards to the fallout of the FTX chapter, there can be additional volatility and worth swings. The fallout will ship waves all through the crypto area for the subsequent 12 months or so.

We don’t anticipate crypto costs to stabilize within the close to future.

Additional rules

We will not ignore the significance of rules. The White Home, SEC, and even the Fed have emphasised the significance of regulating crypto. Now, many inside the trade are asking for them as nicely, which might not have been the case even six months in the past.

Michael Saylor, an advocate for bitcoin, lately spoke on this matter after the FTX debacle, stating, “The way forward for the trade is registered digital property traded on regulated exchanges, the place everybody has the investor protections they want.”

We do not know what these crypto rules will appear like, however we do know that this area desperately wants extra scrutiny.

How must you be investing?

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