SOL changed hands at $30.86 on October 18 before dropping to $14.20 at the time of writing, losing $8.5 billion in market value in the process. But what is behind the massive drop, and will Solana recover from its slump? Read here-
Tough times continue for Solana. Once regarded as an Ethereum killer, the layer-1 blockchain endured several outages this year and has also been the victim of multi-million-dollar hacks in the last couple of months.
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Now, to make matters worse, the platform's native cryptocurrency, SOL, has fallen more than 50 percent over the last 30 days. In fact, it is the biggest loser during that period amongst the top 100 cryptocurrencies by market capitalisation.
SOL changed hands at $30.86 on October 18 before dropping to $14.20 at the time of writing, losing $8.5 billion in market value in the process. But what is behind the massive drop, and will Solana recover from its slump? Tag along to find out.
The FTX crash is one of the biggest reasons for SOL's plummeting value. Several tokens associated with FTX and Alameda Research took a tumble when Sam Bankman-Fried (SBF) announced bankruptcy and stepped down as CEO of the struggling enterprise.
However, Solana was one of the worst-hit tokens, registering a 40 percent drop in value in the week following the FTX meltdown. Faced with massive FUD, investors shied away from SOL. As a result, the token's daily spot trading volume cliff-dived 85 percent, falling from $1.31 billion to around $196 million between Nov 9 and Nov 16, according to data from Messari.
But why Solana? Well, it turns out SBF was an early investor in the Solana blockchain project. He pumped funds into the PoS layer-1 blockchain via FTX's system concern, Alameda Research. Therefore, when FTX came crashing down, it took Solana along for the ride.
Declining NFT figures
Besides FTX's contagion effect, a decline in NFT sales on Solana-based platforms is another reason for the network's poor performance. According to Nansen, the total weekly users throughout the different NFT platforms on Solana dropped significantly from 122,410 to 81,811 in just one week. This marks a 33 percent drop in users.
NFTs were a major contributing factor to the blockchain's early success. However, with NFT sales dropping over the last couple of weeks, SOL seems stuck between a hard place and a rock.
Not to mention the current crypto winter
Things look even worse as we zoom out and see the bigger picture. SOL has fallen over 90 percent since the start of the year. Most of these losses can be attributed to the severe crypto winter we are currently experiencing. Solana's outages and hacks have also dented investor confidence, causing SOL to spiral out of control.
But is it all over for Solana?
Some analysts think not. From a technical perspective, Solana is showing a slight change, with a bullish divergence between its Relative Strength Index (RSI) and its price movements. Investors view this as a signal to buy.
Analysts suggest that Solana could make a 20 percent rebound over a short-term recovery and rise to a resistance level of around $18. To back these notions, SOL has also registered a slight comeback over the last few days. It has rallied from $12.33 on November 14 to $14.20 at the time of writing.
First Published: IST