In 2020, Solana, a cryptocurrency token introduced by Solana Labs, endured a tumultuous journey characterized by significant price fluctuations. Its decline was primarily triggered by the FTX crash, which led to a dramatic loss in the value of the SOL token following the collapse of the FTX crypto exchange in November 2022.
Solana's token suffered more substantial losses during this challenging period compared to other prominent cryptocurrencies, largely because of its close ties to Sam Bankman-Fried (SBF) and his various business ventures.
The downward spiral commenced when SOL experienced a nearly 50% drop in value within a single day, driven by market panic stemming from the proposed takeover of the FTX (FTT) exchange by Binance (BNB). The situation further deteriorated when Binance withdrew from the deal, resulting in an overall decrease of almost 80%, with SOL's value plummeting from its previous high of $38 to below $8.
A significant challenge faced by Solana in late 2022 was its strong affiliation with FTX's founder, Sam Bankman-Fried (SBF), who faced eight criminal fraud charges in the aftermath of his crypto exchange's bankruptcy. SBF, previously a prominent figure in the crypto industry, had been a fervent supporter of Solana, investing over half a billion dollars in Solana tokens and advocating for the benefits of blockchain technology.
Another contributing factor to Solana's troubles was its close association with FTX. This connection became evident on November 14, 2022, when it was revealed that Solana had assets worth $1 million trapped in FTX during an exchange downtime.
Investors who had bet on Solana endured a challenging year, with the token's market capitalization plunging from over $55 billion in January to just above $3 billion by the year's end.
Following the setbacks experienced in 2022, Solana is undergoing a robust resurgence in the current year. Solana had exceptional growth in 2023, with its market value growing by 66% in only one month. The coin's market worth has more than quadrupled this year. Solana has outperformed prominent cryptocurrencies such as Bitcoin and Ethereum, as well as the broader S&P Cryptocurrency LargeCap Ex-MegaCap Index, year to date.
The coin has surged by more than 200% since the beginning of the year, demonstrating substantial growth. Moreover, its trading volumes have rebounded significantly, indicating renewed interest from investors.
The notable recovery of Solana has also alleviated concerns about a potential sell-off by FTX, a cryptocurrency exchange and hedge fund that had been mired in fraud-related controversies.
In the third week of October, funds dedicated to Solana witnessed a notable influx of capital, totaling $24 million in net inflows. This renewed investment interest underscores the renewed confidence in Solana's potential.
On November 1st, Solana, the seventh-largest cryptocurrency by market capitalization, reached a price of $46.65, marking a 15-month high. This remarkable ascent began at the start of the year when Solana was trading at approximately $10.
Solana's recent surge has been impressive, with the coin registering an almost 80% increase in the past month and a substantial 23% rise in just the last week. This surge coincided with the launch of its highly anticipated scaling solution, Firedancer, on the testnet.
While Solana has long been considered a potential "Ethereum killer," it has recently outperformed Ethereum (ETH) in terms of performance, with Ether showing a more modest 11% gain over the same period.
At the Breakpoint conference held on October 31, Dan Albert, the executive director of the Solana Foundation, announced the launch of the testnet for Firedancer. Spearheaded by web3 development firm Jump Crypto since August of the previous year, this project aims to enhance the network's speed, reliability, and validator diversity, with a mainnet launch anticipated in the first half of 2024.
Solana's momentum extends beyond its recent price surge and the introduction of Firedancer. Solana Labs has unveiled an initiative to support early-stage web3 startups through the Solana Incubator program. This program aims to provide funding to emerging companies within the Solana ecosystem, fostering innovation and potentially contributing to the network's long-term value and stability.
The positive momentum for Solana also drew the attention of crypto investor and BitMex exchange co-founder Arthur Hayes, who announced his purchase of SOL.
This resurgence comes after doubts about Solana's future following the collapse of Sam Bankman-Fried's FTX exchange and Alameda Research trading firm nearly a year ago. Bankman-Fried and his entities were significant investors in the Solana ecosystem.
Institutional interest and substantial inflows from investment funds have played a role in Solana's price recovery, as noted by David Shuttleworth, research partner at Anagram.
In fact, crypto funds holding SOL have seen nearly $100 million in inflows this year, making it the second-largest amount after Bitcoin (BTC). Meanwhile, Ether (ETH) funds experienced outflows of $125 million.
The last time Solana exhibited such a bullish trend was in 2021, preceding the previous bull run that saw SOL achieve a new all-time high of $267 which was achieved on November 8, 2021. Therefore, if history repeats itself, as is often the case in financial markets, Solana's price could be in for a remarkable rally.
