The crypto coin Solana (SOL) was one of the strongest falling projects in recent times after the collapse of crypto exchange FTX (read more about this in the November 14 deep-dive). Former FTX CEO Sam Bankman-Fried has long been known as a Solana bull. In today’s deep-dive, we look at the link between the two.
Almeda Research and Solana
FTX’s sister company, Almeda Research, has been involved in the Solana project from the start. They participated in the Initial Coin Offering (ICO) in 2021. The project raised almost $300 million. With their involvement in the investment round, Almeda received a large share of Solana.
Almeda Research reportedly held a large quantity of Solana coins worth several billion dollars. There were speculations that the company sold Solana, among other things, to stabilize FTX’s currency, called FTX token (FTT). FTX’s liquidity problems only increased the pressure for ALmeda to sell. Due to the large quantities that they had available, Solana’s supply increased considerably.
Almeda Research currently still owns a lot of Solana. This is reportedly 13.5% of all Solana coins. This may be bad news for the Solana price. It is expected that Almeda Research will have to sell its own share in Solana because of its bankruptcy. Due to a strong increase in the supply of Solana, the price is falling.
FTX and the Solana ETP
The collaborations between Solana and FTX go even further. For example, both parties have formed investment partnerships on several occasions. FTX set up a Solana-related ETP in collaboration with CoinShares. An ETP is an index that tracks a particular product or portfolio of products. For this project, Sam Bankman Fried reportedly paid 1 million Solana coins as initial funding.
Such collaborations and investments are not uncommon. The bankruptcy of FTX and Almeda has therefore had far-reaching consequences for the price of Solana. With the sharp drop in price, many investors are hesitant to invest in Solana.
On-chain Analysis of Solana after the FTX crash
The crash of FTX has not only left its mark on Solana’s price. We also see a lot happening on-chain. The FTX crash has caused a strong emotional panic reaction among investors, in this section we take an objective look at Solana’s on-chain fundamentals and whether they were impacted by the crash.
Active wallets
The amount of active wallets on a network provides insight into the health of a network. Many users on a network means that the network offers usefulness to the users, in addition, the demand for the underlying token will also increase with a lot of network use, which has an impact on the long-term price of the token.
Since the FTX crash on November 11, we see that the number of active wallets on the Solana network has decreased (Figure 1). On November 10, there were approximately 480,000 active wallets, on November 11 we saw more than 395,000 active wallets and on November 25 this was 341,000 active wallets (the data on November 26 is still incomplete and is therefore not included in the analysis). On the day of the crash, we saw an 18% decrease in active wallets and in the past 2 weeks, we saw activity decrease by as much as 29%. The FTX crash appears to have had a significant impact on Solana’s network activity. What is also striking is that we have been seeing a negative trend in the field of active wallets for some time.
NFTs on the Solana network
NFTs are popular and this is also the case on the Solana network. By looking at the number of new NFTs on the network, we gain insight into the growth of the network. In Figure 2 we immediately see that the creation of new NFTs has decreased sharply in the past 3 months. In September, a peak of approximately 300,000 new NFTs per day was even observed, currently this is only 20,000 NFTs per day. Surprisingly, we see virtually no reaction from the NFT market to the FTX crash, however this may be due to the fact that the growth in NFTs on the network has already slowed considerably.
New wallets
Figure 3 shows the growth of new wallets on the Solana network. Here too we see a decreasing trend over the past three months. On November 10th we saw 266,000 wallets added and on November 11th this decreased to approximately 213,000 wallets, here we see a direct effect of the FTX crash where wallet growth on the network decreased by 20%. However, the effect of the crash is relatively minor compared to the overall downward trend.
Conclusion
On–chain we indeed see a direct effect of the FTX crash on the on-chain fundamentals of the Solana network. Zooming out, we see that Solana’s network fundamentals are on a negative trend overall. That trend generally appears to be more significant than the impact of the FTX crash on the network. The FTX crash may have a lasting negative impact on Solana’s share price due to the negative sentiment that there is now.
The fact that Almeda Research still owns a lot of Solana coins is also not positive for the price in the short term. Before you decide to buy Solana, it seems most sensible to wait for the aftermath of the FTX crash in the near future.