Solana has shed over 20% of its value in the last 24 hours, and over 60% from its monthly high of $38.55. The implosion of the crypto market, the FTX saga, and staking activity by validators this week appear to be its biggest motivators.
The macroeconomic outlook of the market is taking its toll on Sol tokens, forcing many investors to make a run for their money.
Solana adds to market chaos
The implosion of the FTX exchange resulted in a ripple effect across the entire cryptocurrency landscape. Apart from its native token FTT, SOL also took a hit and assumed a bear run.
Lenders and borrowers faltered amid fears of a liquidity crunch as prices plummeted. Further allegations of FTX selling their Sol holding only made the situation worse.
According to Defillama, the SOL total value locked (TVL) has fallen by 31.4% in 24 hours with Marinade finance leading the curve at -22.8%.
The prices of Staked Solana (sSol) are also fluctuating wildly and in many instances breaking the peg with the Sol token. sSol are tokens given to users as proof of ownership of SOL tokens staked with validators. Validators are also rewarded in sSol.
Solend is a lending protocol for the Solana ecosystem, to date, it has lent out over $93.3M to investors. The warning issued on their platform indicates increasing selling pressure by SOL hodlers.
“Solana is currently congested with oracle updates being intermittent, users might face issues with withdrawing. All borrowers are disabled.” Solend lending platform.
Solana compass on-chain stats indicate that 31M SOL, worth $79M at press time, are deactivating at epoch 370 leaving 12M tokens on the protocol. An “epoch” refers to the time when staking rewards from the Solana protocol are earned and then issued. Funds held are held in an epoch for 2.5 days after which they can be re-invested in staking pools or sold. If the funds are dumped by validators into the market they present another powerful dynamic to push prices lower.
A reduction in the amount of SOL staked might indicate that investors are looking to sell all or part of their position.
Sean Farrell, head of digital asset strategy at FundStrat.
Riyad Carey, an analyst at Kaiko crypto data firm, shared with Coindesk that the troubled Alameda holds significant volumes of SOL tokens like OXY and MAPS. The theory is that Alameda will attempt to sell its SOL holdings to raise much-needed liquidity after Binance failed to buy its sister firm FTX under Sam Bankman-Fried (SBF).
Besides liquidity worries, SBF has had deep ties with the Solana ecosystem. SBF reportedly participated in the $314 million fundraiser for Solana Labs, Solana’s development team. His firm also established the Serum exchange which is built on the Solana protocol.
Solana market analysis
SOL coin price has traded south for the last five days losing over 50% of its value from the monthly high.
The MACD histogram indicates increasing SOL price momentum to the downside while the MACD line is breaking below the signal line, suggesting prices will fall lower. The William alligator trend lines are assuming a downward trend. The reactive strength index shows BAT in oversold territory.
While the prices are plummeting some analysts are still optimistic. One of the Validators notes that it’s business as usual for them and remarks that “the remaining stakeholders will get a higher share of the rewards, so they’ll do better.”
Raj Kokal, Co-founder and COO at Solana notes that this is a crucible moment for Solana and that they have the resilience to overcome the bear market conditions.
Anatoly Yakovenko, the founder, echoed similar remarks.
Whether Sol is dead or not, time will be the ultimate judge.
