The Solana community remains optimistic despite the FTX fallout

The Solana community remains optimistic despite the FTX fallout

Solana, once championed as an “Ethereum killer,” has seen the price of its native token SOL Tank rise around 47% over the past week, dominated by the FTX train wreck.

SOL is the one second largest holding from Alameda Research and was heavily promoted by former FTX CEO Sam Bankman-Fried, who resigned today.

According to an earlier Report from CoinDesk As of June 30, 2022, Alameda held $292 million of “unlocked SOL,” $863 million of “locked SOL,” and $41 million of “SOL collateral.”

Akeel Qureshi, principal contributor at Solana-based Hubble Protocol and Kamino Finance, told Blockworks that the current crypto crisis arising from FTX's bankruptcy filing is reminiscent of the collapse of banks during the 2008 financial crisis.

FTX contagion effects

“The fallout from the bankruptcy announcement was immediate contagion, and we are seeing further declines in assets associated with FTX and Alameda,” Qureshi said. “SOL, Solana’s native token, has taken another hit due to Sam Bankman-Fried’s previous open support of the network.”

According to a post by Twitter user weremeow, one of the biggest challenges facing the Solana ecosystem is that wrapped Sollet tokens like soBTC are issued by the now-bankrupt FTX.

“These tokens were launched very early in the Solana DeFi cycle to generate liquidity in the space and should be backed 1:1 by BTC or ETH,” they tweeted. “But unlike wBTC, there has been no formal process and no one knows whether FTX still has the underlying assets.”

Since all major Solana-based DeFi platforms have soBTC assets as collateral, the contagion effect of all this could be much worse than expected if it turns out that soBTC no longer has any underlying assets supporting its value.

weighing up the situation, Blockworks Research Analyst Spencer Hughes said: “Solana currently has $271 million from soBTC and 612 million dollars from soETH in the network. These assets were allegedly bridged from the Ethereum network. It is unclear who exactly is backing these assets, but many speculate that it is FTX.

As a result, he added: "soBTC is currently trading at $13.5k, a steep 25% discount to the price of BTC. At one point, soBTC was trading at $3,400. Meanwhile, DeFi lending platform Solend has paused all loans collateralized by soBTC."

Earlier this week, Solend struggled to liquidate a whale account that had stalled. Although the Situation was later resolved wrote its founder Soju on the Solend Discord that the situation “now looked very bad”.

Liquidity shortages are not the only concerns facing the Solana community. The Solana Foundation announced this earlier this week 47 million sol would be staked out by the ecosystem, which was a poorly timed move quickly reversed.

Community optimism

Despite these numerous challenges since the FTX fallout, many builders in the ecosystem remain resilient.

Tiffany Huang, head of marketing at Magic Eden, the largest NFT marketplace on Solana, told Blockworks: “Despite these developments, we remain as hopeful as ever about Solana’s critical role in building a decentralized ecosystem.”

"As we pick up the pieces, we will continue to build out of deep faith. We remain optimistic about the future of Solana and have seen the community come together to remind each other of the incredible projects that have come to market," Huang said.

This sentiment is shared by Jules Mossler, chief marketing officer at Metaplex Studios, who told Blockworks: “We are now seeing projects supporting each other and planning the next chapter of reinvestment together, and we will be right there.”

A wave of support from crypto Twitter has also been seen in recent days.

Co-founder of Solana Labs Anatoly Yakovenko tweeted “The builders on Solana are second to none, and the projects they build can often only be built on Solana.”

Adding: "We started 2020 after markets crashed and the world went into lockdown - chewing glass is in our DNA and we will get through it together."

Qureshi believes that the recent events that have unfolded are a telltale sign that reflects the importance of decentralization.

“Now centralized crypto exchanges and closed-book lenders are in the crosshairs, but decentralized finance (DeFi) is looking stronger than ever due to its transparency and reliance on users to hold their own assets,” Qureshi said.

As the ecosystem works to recover from the shock, it is expected that there will be many more high-quality DeFi projects that will help the ecosystem prevail, he said.

The price of Solana is now around $16, which is down about 9% in the last 24 hours.

Ornella Hernandez contributed reporting.

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The post Solana Community Remains Optimistic Despite FTX Fallout is not financial advice.