The price of Solana crypto enjoyed a slight rebound in a New Year price bump, rising above $11 over the weekend after crashing to about $8.30 on Thursday — its lowest point since February 2021.
SOL is down more than 96 percent from its all-time high of $260 in November 2021.
The so-called SOL rebound follows a show of support by Ethereum founder Vitalik Buterin, who tweeted on Dec. 29 that “smart people” have told him there is an “earnest smart developer community in Solana,” and that the chain has “a bright future” now that “the awful opportunistic money people have been washed out.” Buterin added that he hopes the Solana community “gets its fair chance to thrive.”
Once touted as an “Ethereum killer” that would revolutionize crypto with its promise of higher transaction speeds and lower costs, SOL lost its fifth-place ranking in November 2022 on the list of top cryptocurrencies by market cap. It now ranks at No. 15 as of this writing after briefly falling off the top 20 list in the last month.
The two-and-a-half-year-old Solana has become a casualty in the downfall of the now-bankrupt crypto exchange FTX, formerly one the industry’s biggest players. Solana was backed by Alameda Research, run by Sam Bankman-Fried, who awaits trial on fraud charges. News reports questioning the health of Alameda’s balance sheet helped set in motion the chain of events that led to FTX’s implosion. FTX’s venture capital arm invested in several Solana-based projects.
Solana, “propped up by VC FOMO,” was touted as the answer to blockchain’s scalability trilemma — security, scalability, and decentralization “but failed to deliver on a single promise,” crypto scalability expert Nick Saponaro wrote in an email to The Moguldom Nation.
Saponaro is the CEO of The Divi Project, a blockchain startup committed to solving usability problems in cryptocurrency. He oversees the development of Divi’s proof of stake blockchain, launched in September 2018. A crypto investor since 2013, his programming expertise spans Ethereum, HyperLedger and PIVX.
“Solana’s fate is no different from many of the over-valued ‘Ethereum killers’ that have come before it,” Saponaro said. “The general feeling was that ‘Sam won’t let it fail.'”
Saponaro described a pattern of behavior that keeps repeating in the run-up to crypto company failures.
“Once again, placing trust in a central point of failure produces the expected result,” he added. “Solana itself had a central point of failure in that it could be switched on and off at the will of a single party. It nevertheless gained significant support as people tried to ride the latest wave. Now that Sam is gone and the tech is laid bare, there’s nothing to prop up this inflated altcoin anymore.”
Saponaro said he predicts that Solana “will go the way of EOS and all the other ETH killers, into obscurity as the devs flee like rats leaving a sinking ship. Already the most popular products are transitioning their projects to EVM blockchains.”
Regarding the industry at large, expect prices to drop further, Saponaro said.
“As long as we can dodge another huge piece of bad news, there will be a slow climb back. If you’re thinking of investing, I would advise caution. The last bear market was over two years long. We are already a year into the latest but the macroeconomic climate is significantly worse. Many believe the bottom is already in but with a recession looming large, no end in sight to the Ukraine war, and out-of-control inflation, it’s likely we’ll see prices decline further before the next bull market kicks off in earnest.”
Not everyone is pessimistic about Solana, which, like many other crypto companies, peaked in 2021 before crypto winter set in.
“The bear market has affected the whole sector wiping out major industry players,” said David Kemmerer, the co-founder and CEO of crypto tax software company CoinLedger.
“The fundamentals of Solana remain intact,” Kemmerer told The Moguldom Nation. “It is a key component of the blockchain space – with its faster transaction speeds – powered by the hybrid proof of history and proof of stake consensus.”
Kemmerer said he’d like to see Solana’s developers focus on the impact of the FTX fall and the network’s outages. “That has been a major concern even before the collapse of FTX,” Kemerer said. “Regardless, Solana is one of the most promising projects in the blockchain space that could address the issues of scalability and low transaction speeds.”