Alameda and FTX Have Extensive Ties to Layer 1 Blockchain Network
It’s safe to say that last week few Solana fans worried about contagion from a centralized derivatives exchange that was focused on putting its name on sports arenas and not DeFi.
Yet the rapid erosion of trust in FTX, the mammoth crypto derivatives exchange, and its sister company, Alameda Research, swept Solana and whipped its token holders with an unforeseen torque.
SOL has plunged nearly 30% in the past 24 hours, far more than other DeFi mainstays such as Polkadot, which slipped 5%, and Polygon, which fell 18%, according to CoinGecko.
The cause: Alameda Research, the crypto hedge fund controlled by Sam Bankman-Fried, held about $1.15 billion in SOL on June 30, according to a report published by CoinDesk last week. This represented 10% of Solana’s market capitalization at the time.
Alameda has invested in seven Solana-based projects, according to data from DeFi Llama. This makes Solana the #1 favorite channel in Alameda; the next is Ethereum with four investments.
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These ties are now bad news for Solana as investors worry about the impact of Binance’s plan to execute an emergency takeover of FTX and shore up its rapidly eroding liquidity.
Even so, crypto veterans have expressed confidence that Solana can weather this tough time.
“There’s a lot of betting against SOL right now, but it doesn’t seem justified from a technological perspective,” Philipp Pieper, co-founder of Swarm, a Berlin-based crypto exchange, told The Defiant. “Solana was technically interesting even before Bankman-Fried discovered her.”
Other investors weren’t so sure.
There are a lot of bets against taking SOL right now, but it doesn’t seem justified from a technological standpoint. Solana was technically interesting even before Bankman-Fried discovered her.
Crypto influencer 0xHamZ told The Defiant that, post-acquisition, Binance may instead support projects on its Binance Smart Chain, which has the second-highest total value locked (TVL) among all blockchains at $5.6 billion, according to DeFi Llama. This move would be a potential blow to Solana.
Solana’s communications manager, Austin Federa, did not respond to a text message asking about Solana’s future in light of Binance’s potential acquisition of FTX.com.
Solana had been having a decent run lately. SOL climbed a respectable 10% in the fourth quarter until news that Binance was set to sell a huge stake in FTX’s token, FTT, hit over the weekend. And at Solana’s Breakpoint conference in Lisbon last week, developers rallied around the project’s goal of being the first crypto platform to serve 1B users.
Solana still wears the shine of her performance as the DeFi darling of the 2021 bull run. The Ethereum rival increased its value 93 times that year. Bankman-Fried touted his optimism on Solana in January 2021 by tweeting that he would buy SOL at $3. “Sell Me Anything You Want”, SBF tweeted. “Now fuck you.”
None of Solana’s founders, Raj Gokal and Anatoly Yakovenko, reported any concerns about contagion from FTX and Alameda.
Their fans have pledged to support the blockchain. “[I’ll] ride or die with @aeykovenko,” Gokal tweeted. “Her vision is well advanced with solana and no one can kill her at this point.”
Jack O’Holleran, co-founder and CEO of SKALE, a modular blockchain focusing on the security and execution layers, Solana says can handle losing FTX-Alameda support, if it does happen.
“Solana has a strong founding team and technology with good potential,” O’Holleran told The Defiant.
Still, O’Holleran said Solana may need to become a more independent ecosystem. “They will now have to play to a much fairer level playing field without the support of the FTX machine behind them.”