The Solana ecosystem has suffered more than most during the FTX collapse. Its native SOL asset has been unceremoniously dumped, and investors appear to be running for the hills.
Solana is heavily intertwined with FTX and Sam Bankman-Fried. So much so that the collapse of the exchange last week sent shockwaves throughout the Solana ecosystem. The big fear is that investment would be pulled and developers would flee.
This was reflected in the collapse of its native asset, SOL. Since the FTX fiasco began on Nov. 6, SOL has plunged more than 50% and is now trading at $18.01. The battered coin is currently down more than 93% from its all-time high, according to CoinGecko.
On Nov. 16, W3T founder Alex Valaitis posted why he thinks that all is not lost for Solana.
The Bad News First
Solana has long been criticized as being centralized and VC-backed — and the downside of this is painfully evident at the moment. It is centralized as FTX and Alameda owned 58 million SOL tokens, which represents nearly 11% of the total supply.
It is unclear how much of this has already been dumped and how much is tied up in litigation, Valaitis noted.
DeFi on Solana has also been battered, with TVL dumping 96% since its all-time high of $10 billion. DeFiLlama reports that there is only $335 million in collateral in DeFi on Solana.
Valaitis blames a lot of this on project Serum, a DEX launched by SBF. Many leading dApps have dropped support for Serum, and the developers are trying to remove FTX control over the project. Additionally, the SRM token has dumped almost 60% in the past fortnight.
Additionally, Solana-wrapped DeFi tokens have also been dumped as they were backed by FTX collateral.
Finally, the Solana Foundation had some direct exposure of its treasury to FTX. Around $1 million in assets were stuck on the exchange when withdrawals were halted.
According to an official document, the Solana Foundation also has exposure to 3.24 million shares of FTX Trading LTD common stock, 3.43 million FTT tokens, and 134 million SRM tokens. “The total exposure to Sollet-based assets on Solana in circulation is valued at approximately $40 million as of Nov 10, 2022,” it stated.
All of this is in addition to Solana’s performance and reliability problems which have plagued the network all year.
A Case for Solana Recovery
It all paints a very grim picture for Solana, but Valaitis gives it some hope of recovery. According to its co-founder, the Solana Foundation still has a decent-sized treasury that could last at least another two years.
There is still a ‘strong developer community’ according to Valaitis, who cited the recent hackathon in Portugal as an example.
Solana still has a thriving NFT ecosystem and remains in second place despite the ecosystem woes, according to CryptoSlam. There is also high network and web3 activity on the platform, making it too early to write it off.