Will Solana (SOL) Collapse?

Many people wonder if the Solana (SOL) and blockchain could collapse because of connections with FTX.

Alameda Research, a hedge fund founded by FTX mastermind Sam Bankman-Fried, was a heavy investor in Solana Labs, the organization behind Solana, Forbes alleges. Forges claims Solana (SOL) was Alameda’s second largest investment. Alameda also invested heavily in Serum (SRM), MAPS (MAPS), and Oxygen (OXY) through the Solana blockchain, Forbes alleges.

The Solana team admitted they had around $1 million in cash and assets invested in FTX on 6 November 2022. However, Solana Compass estimates Alameda had a huge stake in Solana.

Solana and FTX

Alameda and FTX bought over 50.5 million SOL from the Solana Foundation, Forbes claims.The Solana Foundation is the organization that builds and maintains the Solana blockchain.

Conversely, Solana Compass admits “We don’t know which ones belonged to Alameda” when examining stake accounts. On 7 January 2023, Solana Compass estimates they withdrew 370 Solana Stake accounts associated with Alameda.

Solana Compass estimates they have reactivated 4.929 million of Alameda’s staked Sol on 7 January 2023. Another 12.754 million Alameda SOl are pending withdrawal and they have withdrawn 6.391 million in Alameda Sol.

Is Solana Unstable?

Skeptics will wonder if Solana (SOL) is unstable. Some recent news stories show Solana could be unstable.

For example, the developers of the Solana Meme coin Bonk (BONK) burned their allocation of five trillion BONK on 6 January 2023, Decrypt alleges. However, the five trillion BONK were only worth $1 million, which shows many Solana assets could be worthless.

Bizarrely, CoinDesk claims BONK tokens were generating over 1,000% in returns for Solana Liquidity Providers on 4 January 2023. Moreover, CoinDesk estimates BONK’s Coin Price grew by 150% between 3 January and 4 January 2023.

Bubbles in the Solana Blockchain

CoinMarketCap gave BONK a $0.000001569 Coin Price, an $88.294 million CoinMarketCap, a $157.459 million Fully Diluted Market Cap, and a 24-Hour Market Volume of $25.703 million on 9 January 2023. There was also a $24.686 million Centralized Exchange (CEX) Volume and a $76.262 million Decentralized Exchange (DEX) Volume on 9 January 2023. They base those numbers on a Self-Reported Circulating Supply of 56 Trillion BONK and a Total Supply of 99.868 trillion BONK.

CoinMarketCap estimates Bonk prices rose from $0.0000009618 on 3 January 2023 to $0.0000048 on 4 January 2023 and fell to $0.000001484 on 6 January 2023. Bonk’s 24-Hour trading volume rose from $7.47 million on 3 January 2023 to $174.27 million on 4 January 2023.

I think these numbers show Bonk was in a bubble. Therefore, I think Solana assets are susceptible to bubbles and inherently unstable.

How Unstable is Solana?

Solana (SOL) is unstable. For example, Solana’s Coin Price fell from $142.54 on 8 January 2022 to $13.22 on 7 January 2023. Hence, Solana’s Coin Price shrank by $129.32 in a year. Solana’s Coin Price rose to $16.20 on 9 January 2023.

Conversely, Solana’s Market Capitalization is collapsing. CoinMarketCap estimates Solana’s Market Cap was $42.47 billion on 7 January 2022 and $5.993 billion on 9 January 2023. Hence, Sol has lost over 90% of its market cap in a year.

CoinMarketCap named Solana (SOL) its 11th ranked cryptocurrency with a $8.719 billion Fully Diluted Market Cap and a 24-Hour Market Volume of an $2.009 billion on 9 January 2023. Solana had a $2.006 billion Centralized Exchange (CEX) Volume and a $4.597 million Decentralized Exchange Volume on 9 January 2023. They base those numbers on a Circulating Supply of 370.009 million SOL and a Total Supply of 538.169 million SOL.

Therefore, SOL itself is an unstable cryptocurrency that lost most of its value in 2022. I think SOL shows that blockchains and cryptocurrencies are inherently unstable and untrustworthy.

What is Solana (SOL) Anyway?

Solana is an attempt to build a fast and scalable blockchain that will serve as an alternative to Ethereum (ETH).

Solana’s most attractive feature is its speed. Solana claimed its blockchain was processing 3,912 transactions per second (TPS) on 9 January 2023. In contrast, ETHPS.info estimates Ethereum’s blockchain was processing 34.52 TPS on 7 July 2023. Hence, the Ethereum blockchain can only serve 34 customers at once, while the Solana blockchain can support 3,912 customers.

They claim the average cost of a Solana transaction is $0.00025. Thus, Solana is fast and cheap.

Hence, Solana could support giant ecommerce platforms or games that have millions of customers or players. Conversely, Ethereum cannot support mass market solutions without the addition of a second layer.

Solana is Scalable

Solana is a fast because it is scalable.That means Solana can theoretically “get big quick” or grow fast. Most blockchains cannot get big quick because of all the cryptography and security measures.

Solanabeach estimates Solana had processed 131.059 billion transactions as of 7 January 2023. Solana can process that many many transactions because its blockchain has 1,948 validator nodes on 7 January 2023.

A valdiator node verifies transactions and makes records of them. Valdiator nodes also vote on transactions. Validator notes are the basis of any blockchain’s security.

They claim Solana supported over 11.5 million active accounts on 7 January 2023. Solana claims 21.9 million nonfungible tokens were minted on Solana’s blockchain as of 7 January 2023.

I think Solana could achieve widespread use if they use it for central bank digital currencies (CDBDs) and stablecoins. To explain, a CBDC is a cryptocurrency a central bank issues. For example, the People’s Bank of China (PBOC) is pioneering the e-CNY CBDC in 15 of China’s 23 provinces.

Solana and USD Coin (USDC)

A stablecoin is a cryptocurrency that contains a smart contract that makes payment in a fiat currency. For example, the USD Coin (USDC) stablecoin makes payments in US dollars when you spend it.

Solscan estimates there was $5.04 billion worth of USDC circulating on Solana on 9 January 2023. A number of exchanges, including Binance, suspended trading in Solana-based Tether (USDT) and US Coin in November 2022, Crypto Potato reports. They halted trading because of concerns there were no US dollars in the accounts those Solana assets make payment from.

To explain, Solana uses USDT and USDC stablecoins to provide liquidity for many transactions and US dollars for fiat currency payment.

Who is using Solana (SOL)?

Solana is working some giant companies including Alphabet (GOOG), Facebook or Meta Platforms (META), and Stripe.

Popular apps built on Solana include StepN, Swim, Formfunction, Hello Moon, Nation, Audius, Phantasia Sports, Solsea, CropperFinance, HydraSwap, Lumos Exchange, Solend, DexLab, Naga Kingdom, Space Falcon, HDOKI, MetaVersana, Salad Cat Coin, Secretum, Magic Eden, Star Atlas, Raydium, Mango, and the Digital Eyes Market.

Solana is a widely used Blockchain that forms the basis of many popular games, NFT marketplaces, and DeFi solutions. Hence, there is a genuine value at Solana. However, the price collapse shows Mr. Market overestimated that value.

I suspect Solana will survive and find uses. However, the market shows Solana’s value is below what many people thought. Hence, I suggest speculators avoid Solana until its price stabilizes.