FTX Contagion Is Spreading To the Solana Ecosystem
Solana's SOL is down much further than any of the other major cryptocurrencies today, all of which are down badly following the sudden unraveling of the wildly fast growing crypto exchange FTX on Tuesday. Axios reports: Blockchain principles aim to instantiate the ideals of decentralization. That is, no single points of failure. Blockchain realities, though, show that each community tends to have its major leaders. For Solana, one of those was definitely FTX's c0-founder, Sam Bankman-Fried (SBF). SBF has long been bullish on Solana, including working to build Serum, an order book style exchange that runs in a decentralized fashion. His firms are rumored to have owned a substantial amount of the total SOL supply. FTX and Alameda Trading are in trouble. If they hold large amounts of SOL, they are very likely to exit those positions, which will tank SOL price. CoinDesk reported on Nov. 2 that Alameda had $292 million in SOL and $863 million in locked SOL (on the Solana blockchain, large holders can earn more by backing the blockchain's validators by committing not to sell -- or locking -- for a certain period of time). "People are dumping already -- self-fulfilling prophecy," Economics Design's Lisa Jy Tan told Axios over Twitter DM. Tomorrow, the entities verifying the Solana blockchain have already publicly indicated their intention to unlock about a billion dollars worth of SOL (at current prices), about 17% of its market cap. It's reasonable to expect they might intend to sell. Solana's fall has put stress on one of its leading decentralized finance applications, Solend, a money market that works much like Ethereum's Compound. Solend is gradually unwinding a single, almost $30 million USDC (stablecoin) loan, collateralized by SOL, which is falling fast while the protocol tries to sell. Much like SOL's price, the total value locked (TVL) in various DeFi projects on Solana has fallen much further in the last day than on other smart contract blockchains, according to DefiLlama. Solana TVL is down 45% over the last day, to $470 million, as of Wednesday afternoon, New York time.
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