Solana Supporters Buck Up Network As FTX Contagion Takes Toll

It’s safe to say that last week few Solana fans were worried about contagion from a centralized derivatives exchange that focused on putting its name on sports arenas and not DeFi.

Yet the rapid unraveling of confidence in FTX, the mammoth crypto derivatives exchange, and its sister firm, Alameda Research, has swept up Solana and whipsawed its tokenholders with unforeseen torque. 

Alameda Contagion

SOL has plunged 44% in the last 24 hours, far more than other DeFi stalwarts such as Polkadot, which has skidded 11%, and Polygon, down 22%, according to CoinGecko. 

The cause: Alameda Research, the crypto hedge fund controlled by Sam Bankman-Fried, held roughly $1.15B in SOL on June 30, according to a report published by CoinDesk last week. That represented 10% of Solana’s market capitalization at the time.

Alameda has invested in seven Solana-based projects, according to data from DeFi Llama. This makes Solana the No. 1 favored chain at Alameda; the next one is Ethereum with four investments.

Moreover, in July 2020, FTX chose Solana as the blockchain infrastructure for a decentralized exchange called Serum. 

Those links are now bad news for Solana as investors worry about the impact of Binance’s plan to execute an emergency takeover of FTX and shore up its rapidly eroding liquidity. 

Even so, crypto veterans expressed confidence that Solana can ride out this rough stretch.

“There are lots of bets against SOL being taken right now, but this does not feel justified from a technology perspective,” Philipp Pieper, co-founder of Swarm, a crypto exchange based in Berlin, told The Defiant. “Solana was technically interesting even before Bankman-Fried discovered it.”

Other investors weren’t so sure.

‘There are lots of bets against SOL being taken right now, but this does not feel justified from a technology perspective. Solana was technically interesting even before Bankman-Fried discovered it.’

Crypto influencer 0xHamZ told The Defiant that, post-acquisition, Binance may rather support projects on its Binance Smart Chain, which has the second highest total value locked (TVL) among all blockchains at $5.6B, according to DeFi Llama. That decision would be a potential blow for Solana.

Others, like the trader who goes by Tree of Alpha, asked why SOL should have any value at all. “Someone redpill me on why $SOL is worth any number above $0,” the trader tweeted.

Huge Stake

Solana’s head of communications, Austin Federa, did not reply to a text message asking about Solana’s future in light of Binance’s potential acquisition of

Solana had been enjoying a decent run of late. SOL climbed a respectable 10% in the fourth quarter until news Binance was poised to sell a huge stake of FTX’s token, FTT, hit during the weekend. And at Solana’s jampacked Breakpoint confab in Lisbon last week devs rallied around the project’s goal to be the first crypto platform to serve 1B users. 

Solana still bears the luster of its performance as the DeFi darling of 2021’s epic bull run. The Ethereum rival multiplied in value 93 times that year. Bankman-Fried famously touted his bullishness on Solana in January 2021 by tweeting that he would buy SOL at $3. “Sell me all you want,” SBF tweeted. “Now go f**k off.”

Neither of Solana’s founders, Raj Gokal and Anatoly Yakovenko, have signaled concern about contagion from FTX and Alameda. 

Their fans have pledged to backstop the blockchain. “[I’ll] ride or die with @aeykovenko,” tweeted Gokal. “His vision is well underway with solana and nobody can kill it at this point.”

Good Potential

Jack O’Holleran, co-founder and CEO of SKALE, a modular blockchain focusing on the security and execution layers, says Solana can endure losing the FTX-Alameda support, if that indeed transpires.

“Solana has a strong founding team and technology with good potential,” O’Holleran told The Defiant.

Still, O’Holleran said Solana may have to become a more independent ecosystem.“They’ll now have to play on a far more level playing field without the support of the FTX machine behind them.”