FTX contagion: Solana facing a test of strength

FTX contagion: Solana facing a test of strength

The FTX contagion is spreading, and one of its most obvious victims is Solana.

The exchange, which was already suffering from repeated blackouts, now faces new threats related to the FTX crash.
$SOL price lost 57% since November 8th, and the crypto industry is growing skeptical as to its capacity to recover, especially facing new blockchains like Aptos.

🔸 Ties with FTX

SBF was one of Solana’s most active proponents and contributed a lot to the blockchain’s ecosystem quick rise (FTX NFT, Serum DEX… etc) This support now turns into a liability.

The Solana Foundation had 134.5 million of $SRM and 3.4 million of $FTT on FTX, worth $190 million before the withdrawal freeze and less than $34 million now.

🔸 Loss of NFT momentum

Solana has deployed a lot of efforts to develop its NFT trade, which reached its record number of 650k weekly transactions in September (including mints). For comparison, number of weekly Ethereum NFT transactions in roughly the same period was about 1.1 million.

Since October, however, Solana NFT transactions have fallen to below 150k/week, and one of the widely cited reasons was the emergence of Aptos – a new PoS blockchain directly competing with Solana.

There aren’t yet any analytic tools for Aptos and its lead NFT marketplace Topaz, but, according to Topaz founder, its first week’s trading volume could have matched that of Magic Eden (Solana’s top NFT marketplace).

Also, reputational damage from association with FTX has forced Metaplex, Solana’s NFT protocol maker, to lay off part of its team.

🔸 Stablecoin mess

FTX was heavily involved in creating a DeFi ecosystem on Solana, and is believed to be the issuer of soBTC, soETH, and other wrapped coins (calls sollets) that represent other blockchain’s assets on Solana.

These stablecoins have de-pegged from their equivalents as soon as the new of FTX crash has broken. The ecosystem exposure to sollets was valued at $40 million, as per Solana Foundation.

A growing confusion also surrounds famous centralized stablecoins on Solana. Crypto .com, Binance and OKX have suspended deposits and withdrawals of USDT and USDC on Solana. As crypto .com precised, “FTX was an important bridge/venue for SOL-based stablecoins” and the exchange wanted to avoid “any additional risk”.
Binance has since resumed SOL-based USDT deposits.

Solana’s rise was spectacular, just like that of FTX. The blockchain must now prove that its foundations were solid, otherwise it will not outlive FTX much longer.