Solana Blockchain SOL Token Doubles From FTX Crash-Induced Lows, But Will It Continue To Rebound?

One of the hardest hit tokens in 2022 has been an upbeat story this year.

SOL, the native currency of the Solana blockchain, has doubled in price since mid-December to hover around $21, reaching as high as $24 earlier this week, roughly where it stood before investors began to worry about the intricacies of the beleaguered the crypto exchange FTX and its sister company Alameda Research. In the last week alone, SOL has risen 22%, and it is up 114% this year.

The surge started after a favorable tweet by Ethereum co-founder Vitalik Buterin, who expressed “hopes” the Solana community “gets its fair chance to thrive” in a tweet, shortly after SOL had plunged to an all-time low of $8.19. Buterin’s comment staved off damage from reports that the token was the second-largest holding of Alameda Research, the trading arm of FTX whose unruly balance sheet triggered FTX’s descent into bankruptcy protection, even though SOL had already fallen significantly before the FTX disclosure.

According to data from DefiLlama, the total value locked (TVL) on the Solana chain fell 96% in 2022, from $6.68 billion in January to $206 million at the end of December.

SOL’s price rise has sparked renewed hope among cryptoanalysts and blockchain developers and executives about the blockchain’s long-term future.

Critics have criticized Solana for being too centralized and venture capital-controlled. But Riyad Carey, research analyst at crypto data firm Kaiko, said that “with Alameda gone, the protocol is somehow free of that baggage and can become more community-centric.”

“I think Solana definitely has a lot of staying power,” Carey told CoinDesk. “Will it be a top three or five chain off [total value locked] in a year? I’m not really sure, but it certainly has potential.”

Messari senior research analyst Tom Dunleavy wrote in a recent research note that Solana’s on-chain performance has been strong, with daily active wallets interacting on major Solana protocols remaining constant post-FTX and transaction volumes and active accounts returning to pre-FTX levels .

“It’s certainly an open question how sticky this new volume level is. However, at least a consistent volume level with FTX leaving the ecosystem is a positive sign,” he wrote.

Michael Repetny, core contributor at Solana-based liquid staking protocol Marinade Finance, highlighted that when SOL’s price dropped after the FTX crisis, the number of validators also dropped from 2,400 to 2,000.

“Bonk is like an entry point to the Solana ecosystem, just like people are coming to non-fungible tokens (NFTs) for gaming,” he told CoinDesk in an interview, adding: “With trust and faith in the Solana community, this beyond Sam’s coin.”

Stefan Rust, CEO of blockchain technology firm Laguna Labs, said Solana has “held solid ground” by staying within the top 20 cryptocurrencies by market capitalization after FTX, while achieving the metrics developers seek, including a project’s “distribution,” “difficulties”. in toolkit use, ‘marketing and visibility’ and ‘money’. He expects SOL’s price to return to $30 and even possibly $50 by the end of the year.

Brendon Sedo, a contributor to the tier 1 blockchain Core DAO, compared Solana’s current status quo to Ethereum’s crash in 2018 and believes that it will bounce back the same way, despite growing competition from the likes of rivals Aptos and Sui. “I think this will likely be the outcome for Solana, pulling out what Ethereum finally left after the dark days of the 2018 bear market,” he said.

“While it may take time to get rid of the FTX and Alameda baggage, in the long run it is possible that the loss of these toxic entities will lead to a more decentralized and fair network,” said Akash Mahendra, portfolio manager of multichain digital wealth platform Yield App.