Solana Panic, Volatility and Huge Put Orders
[TL; DR]
The collapse of FTX resulted in fear of liquidation of SOL since Alameda had invested much in it.
After the implosion of FTX the value of SOL decreased by more than 25% within one week.
Currently, SOL is ranging with a price of over $21, an increase of over 100% from its November 2022 value.
SOL remains one of the top ranked cryptocurrencies which investors can buy from Gate.io.
Introduction
Solana, the layer 1 blockchain, is a crypto eco that has been hit hard by the collapse of FTX. This is because FTX held many Solana cryptos over a long period. Alameda, the sister company of FTX, held many SOL tokens. In this post, we discuss Solana crypto exposure to FTX and Alameda. We also look at how the collapse of FTX affected the price of Solana (SOL).
Exposure of Solana crypto to FTX and Alameda Research
The Solana blockchain, touted the biggest rival of the Ethereum blockchain, faced a tough test in November 2022, following the collapse of FTX crypto exchange. Both its total value locked and price plunged a week after the FTX filed for bankruptcy.
For example, by the second week of November 2022, Solana’s total value locked had decreased by 70% to $303 million. Within the same period, the value of SOL decreased by a quarter, an indication of harder days ahead. Now, let’s briefly discuss the relationship that existed between Solana and FTX before its implosion.
Read also; FTX’s collapse Affected a Wide Cross section of the Crypto
Basically, FTX and Alameda Research have been investing in Solana since December 2020. For example, FTX acquired 4 million SOL from the Solana Foundation in August 2020, a further 12 million in September and an additional 34.52 million SOL in January 2021.
The huge FTX and Alameda acquisition of SOL was confirmed by the Solana Foundation and Solana Labs. They said that the two sister companies own 58.08 million SOL, about 11% of the total supply. Sadly, the FTX crypto exchange which used to handle over $10 billion in daily trading volume became insolvent in September 2022 and filed a case of bankruptcy on 11 November 2022 which was investigated by the U.S. Department of Justice and other federal and state agencies.
Crypto Panic as Solana Volatility became imminent
The crypto market panicked soon after the collapse of FTX in 2022, signaling a possibility of massive liquidation of SOL. The developments involving SOL in November showed that SOL was facing serious challenges as there was a possibility of a surge in supply and a fall in the crypto demand.
Within a week that stretched to 10 November, the implied volatility of SOL rose to an annualized 270%, about two times that of Bitcoin which was 135% at that time. Similarly, SOL’s 30-day implied volatility increased to 90%, a figure considered to be very high and showed market turbulence. On the other hand, SOL’s call-put skew fell to a low of -99%, indicating that the market was expecting a sharp price fall.
To this effect Gregoire Magadini, the director of derivatives at Amberdata, said “There is panic in the SOL market.Traders are nervous about the value of SOL and the potential for massive liquidations.”
He clearly pointed out the reason why SOL could be liquidated at that time. He added, “SOL is a collateral asset; it’s likely to get liquidated as FTX/Alameda needs to raise cash.”
According to CoinDek, the price of SOL fell by 50% to a low of $10 within four days. However, the selling pressure continued for many more days. For instance, the validators promised to sell $800 million worth of holdings within a day.
Also on November 10, epoch 370 came to an end giving investors the chance to unstake their SOL at a higher rate than before. Subsequently, Solana stakers from epoch 370 to 372 unstaked a total of 39 million SOL, a sign of growing risk aversiveness.
The possibility of short term emission of SOL also created greater selling pressure than ever before. The Solana blockchain intended to unlock 2,558,000 SOLs at a rate of 68,493 SOL/day. During these market turbulent days, fear also mounted that FTX’s sister company Alameda Research might liquidate its SOL holdings which would lead to a further free fall of the token.
Read also: Solana or Ethereum：Which is The Better Smart Contract Platform
It is unsurprising that the above developments created negative sentiments on SOL and the entire crypto market. Nonetheless, SOL absorbed the selling pressure that mounted within the last 2 months of 2022.
SOL’s current Value and market position
At the time of writing, SOL is performing well on the market, considering its current price ($21), about 100% higher than its November 2022 value. With a current market capitalization of $ 8.17 billion, a trading volume of $ 194.90 billion and a circulating supply of 385.67 million, SOL has gained 91.71% since the beginning of 2023. The following graph gives a full picture of SOL’s price performance within the last three months.
As you see from The Graph, the value of SOL was around $11 at the beginning of January 2023. However, it has risen to over $21 within three months, expelling any fears of liquidation.
Solana Prediction for 2024 and 2030
The anticipated price for SOL for 2024 and 2030 should give you a clear picture of how the market views it and its potential for growth. Predictions from several crypto analytics firms show possible price ranges for SOL. Generally, the variances in their predictions are small. For example, both Bitnation and Changelly predict that the price of SOL will be around $30 by the end of 2023.
For 2024, they predict that its value will be within a range of $33 and $60. Also, the two platforms anticipate that SOL’s price in 2030 is likely to be within the range of $332 and $376.24.
As you observe, Bitnation predicts the price of SOL to be around $29 in 2023, $60 in 2024 and $180 by 2030. On the other hand, the following table shows Changelly’s price prediction for SOL for 2023, 2024, 2025 and 2030.
As you can see, Changelly predicts that SOL’s price will be $29.84 by the end of 2023, $42.99 by the end of 2024 and $376.24 in 2030. Looking at SOL’s current price this price range is attainable.
how to buy sol at Gate.io
In order to buy SOL at Gate.io you need to have a verified account. The verification process is very simple as it only involves submitting your national identity details through the Gate.io web platform.
The next step is to fund your wallet at Gate.io. You can deposit any of the other major cryptocurrencies like ETH, USDT or Bitcoin. Alternatively, you can purchase any of these cryptocurrencies using a credit card or wire transfer.
Once you fund your wallet, you go to the Spot Trading section and select the appropriate pair such as USDT/SOL as shown in the image below.
When you select the pair (USDT/SOL) a new window will open that allows you to convert USDT to SOL, as shown below.
As soon as you input the amount of SOL you want to buy, click “buy sol” for your transaction to be processed.
Conclusion
The Solana crypto faced much crypto volatility in November 2022, following the collapse of FTX. There was fear in the market that if FTX’s sister company Alameda Research would liquidate all its SOL holding the crypto would experience another free fall. However, SOL remained firm for the rest of 2022 and is faring well in 2023.
