Headwinds which have overshadowed Solana - "the Ethereum Killer"

• According to Glassnode data, long-term Bitcoin holders have an unrealized loss of 6,057,858 bitcoins this year.
• From being touted as a revolutionary solution to Ethereum’s scalability issue to being a part of a larger domino effect, Solana has been one of 2022’s worst-performing assets, losing around 96% from its all-time high.
• However, Solana still has many things to offer, including a vast array of blockchain projects.

The rapid decline in the price of Bitcoin has harmed both short-term and long-term investors. According to Glassnode data, long-term holders lost 6,057,858 bitcoins as of December 26 compared to short-term holders who lost 1,889,585.

 

Also, the correlation between large transactions of $1 million or more and overall BTC price strength are now at their lowest levels since December 2020.

 

 

Whale to BTC Price ratio | Source: Santiment

 

Additionally, the Oregon Division of Financial Regulation (DFR) issued a press statement warning cryptocurrency investors that phony websites and applications set up by con artists are intended to steal their money and provide nothing in return. Before transmitting money to cryptocurrency trading platforms, the DFR advised traders to "do their homework."

 

The DFR cited as an example a website claiming to be run by the US Department of State. The website stated that it was attempting to assist FTX customers in recovering their assets, according to the DFR. As a result, the website obtained data from an investor, including usernames and passwords.

 

It will be interesting to see how much fuel the bears have in their tank in 2023 with the current underwhelming microeconomy in their favor.

 

 

Source: Coin360 | Crypto Heatmap

 

Top Altcoin Gainers

Internet Computer (ICP) ➠ +8.44%

Terra Classic (LUNC) ➠ +6.19%

Lido DAO (LDO) ➠ +5.85%

 

Top Altcoin Losers

Chain (XCN) ➠ -33.07%

Solana (SOL) ➠ -23%

Axie Infinity ➠ -16.15%

 

The Crypto Fear and Greed Index is ending the year in the fear zone (28) as investors prepare for a shaky 2023. There are lots of things to deal with; inflation, recession, the FTX saga, rising mortgage rates, and increasing personal debt.

 

 

Fear & Greed Index | Source: Alternative

 

From being touted as a revolutionary solution to Ethereum’s scalability issue to being a part of a larger domino effect, Solana has been one of 2022’s worst-performing assets. On December 29, the price of the Ethereum Killer hit its lowest levels since February 2021 and is suffering from a scarcity of developers, as many of them are fleeing to competitors. How did this high-flying, VC-loved cryptocurrency fall from its exalted position?

 

There are three distinct reasons for Solana’s fall from grace. Let’s look at each.

 

FTX Exposure

At this point, it is starting to get fishy. How was FTX able to gain the trust of even prominent players in the crypto space? Well, we’ll probably answer that next year; but for now, we will look at how Solana got exposed to FTX.

 

A Solana statement released in November showed that FTX controlled over 50 million SOL. This is through a linear monthly unlock system which saw the Solana Foundation give FTX 4 million SOL on August 2020, 12 million SOL from September 2020, and nearly 34.52 million SOL from Jan. 7, 2021.

 

Although the SOL tokens are vested, with the last unlock due by January 2028, The FTX bankruptcy hearing might see a freeze on the Solana tokens.

 

Security Breaches

This year, over $8 million has been lost to hacks across Solana-based hot wallets and Solana-based smart contracts.

The latest was seen in August 2022 when users reported on Twitter that their hot wallets had been drained. The 10-minutes window of draining saw over $6 million lost from about 8000 wallets.

 

According to blockchain researcher PeckShield, the widespread theft is most likely the result of a "supply chain flaw" that has been exploited to steal user private keys from affected wallets on August 2.

 

Solana’s Achilles Heel - Network Outages

Since its launch in 2020, the Solana network has seen a number of network disruptions that have been caused by a variety of various congestion and spam events. The network has experienced at least seven outages this year alone, with the longest lasting for 17 hours. While the culprit has been low transaction fees, digging deep reveals a bigger foundational flaw.

 

Surprisingly, the co-founder claimed Solana is primarily a communication protocol, and SOL is not money. This is perhaps why several protocols and developers are fleeing to other networks like Snowfall, Polygon, and even Cardano.

 

 

Daily Active Developers on Solana | Source: Token Terminal

 

With all that being said, Solana is still one of the most popular projects for builders and blockchain projects. Its transaction speed and cheaper gas cost is still more than a valuable asset for protocols that require speed and numerous transactions to execute their smart contracts.

 

On top of that, when it comes to pricing, some analysts have been comparing this drop to Ethereum's drop in 2018-2019, when ETH dropped 95% before soaring again.

 

➺ 28/11/2022 - MMO Coin AMA

➺ 28/11/2022 - Orbs AMA with Kucoin Japan

➺ 30/11/2022 - Badger DAO Community Hall

➺ 2/12/2022 - Step App Conference 2022

 

Solana’s price action in 2022 has been less than optimal to say the least.

 

2022 has been one hell of a year for the Solana project. SOL’s price has been incredibly volatile, with the crypto reaching $121 in March 2022. This impressive rally was largely driven by the announcement of several major partnerships that enabled Solana to become one of the world's most widely used blockchain platforms.

 

However, with the overall bearish crypto market pressure, the token plummeted ever since, with its price closing in June at $30. Following this downtrend, the token started to consolidate for the next four months, and its price remained at $30 till the end of October.

 

Then came the FTX collapse, where SOL lost 50% of its value in a single week - the first week of November. Remember Sam Bankman-Fried (FTX founder) was an active advocate of the Solana project? That negatively impacted the token’s price and the overall project’s reputation. This Thursday, the token again saw a sharp drop in its value (10.4%), with the project losing its protocol. Overall the value of SOL got dropped by ~95% this year.

 

 

SOL/USDT Chart on the Daily Timeframe | Source: KuCoin

 

On the weekly timeframe, all the major technical indicators and oscillators suggest a strong sell for the SOL token, with RSI reaching 30 and beyond. However, the 5-min and 15-min timeframes show a few green candles as buyers try to take advantage of the sudden price drop. If you are scalping SOL, keep a keen eye on the 8.7 & 8.9 support levels.

 

All that said, Solana has proved its fundamental strength before and the innovation it brings to the blockchain world. So it could be interesting to see the SOL’s price action in 2023.

 

---

 

Sign up on KuCoin, and start trading today!

 

Follow us on Twitter >>> https://twitter.com/kucoincom.

 

Join us on Telegram >>> https://t.me/Kucoin_Exchange

 

Download KuCoin App >>> https://www.kucoin.com/download

 

Also, Subscribe to our Youtube Channel >>>Listen to 60s Podcast

Source: KuCoin