Solana’s slide accelerates — $50 billion in value wiped from the cryptocurrency in 2022
Solana logo displayed on a phone screen and representation of cryptocurrencies are seen in this illustration photo taken in Krakow, Poland on August 21, 2021.
Jakub Porzycki | NurPhoto | Getty Images
Solana was touted as the cryptocurrency that would challenge ether with an eco-friendlier approach, faster transaction speeds and more consistent costs.
Investors who made that bet had a miserable year. The token’s market cap collapsed from over $55 billion in January to barely above $3 billion at year-end.
Among Solana’s biggest problems in late 2022 was its close relationship to FTX founder Sam Bankman-Fried, who faces eight criminal fraud charges after his crypto exchange went bankrupt last month. The disgraced former crypto billionaire was one of Solana’s most public boosters, touting the advantages of the blockchain technology and investing over a half-billion dollars in Solana tokens.
“Sell me all you want,” Bankman-Fried told one skeptic in January 2021. “Then go f— off.”
Bankman-Fried’s companies held nearly $1.2 billion worth of the token and associated assets in June, according to documents reviewed by CoinDesk.
When FTX fell apart, investors bailed on Solana to the tune of about $8 billion. But in recent days, as the rest of the crypto world has been relatively quiet and prices stable, Solana has plummeted further.
Two of the biggest non-fungible token (NFT) projects built on Solana announced their migration off of Solana’s platform on Christmas Day. But the recent slides came after that news had already broken, making Solana’s recent slide something of a mystery.
In the last week, Solana has declined over 30%. Ether has held steady, shedding 1.7% in the same time period, while bitcoin has only dropped 1.2%. Among the 20 most-valuable cryptocurrencies tracked by CoinMarketCap, the next biggest loser over that stretch is Dogecoin, which has fallen 9%.
In just one hour of trading on Thursday, Solana slid 5.8%, bringing it to the lowest since early 2021, around the time that Bankman-Fried began to vocally offer his support for the project.
Solana has since come off the lows, with a market cap now crossing $3.5 billion. Its 24-hour trading volume is up over 200% on a relative basis.
During the crypto market’s heyday in 2021, Bankman-Fried was hardly alone in his bullishness.
Developers raved about Solana’s support for smart contracts, pieces of code that execute pre-programmed directives, as well as an innovative proof-of-history consensus mechanism.
Consensus mechanisms are how blockchain platforms assess the validity of an executed transaction, tracking who owns what and how well the system is working based on a consensus between multiple record-keeping computers called nodes.
Bitcoin uses a proof-of-work mechanism. Ethereum and rival Solana use proof-of-stake. Rather than relying on energy-intensive mining, proof-of-stake systems ask big users to offer up collateral, or stake, to become “validators.” Instead of solving for a cryptographic hash, as with bitcoin, proof-of-work validators verify transaction activity and maintain the blockchain’s “books,” in exchange for a proportional cut of transaction fees.
Solana’s supposed differentiating factor was augmenting proof-of-stake with proof-of-history — the ability to prove that a transaction happened at a particular moment.
Solana soared over the course of 2021, with a single token gaining 12,000% for the year and reaching $250 by November. Yet even before the collapse of FTX, Solana faced a series of public struggles, which challenged the protocol’s claim that it was a superior technology.
Much of Solana’s popularity was built around growing interest in NFTs. Serum, another exchange backed by Bankman-Fried, was built on Solana. When the calendar turned to 2022, Solana’s limitations started to become apparent.
Barely a month into the year, a network outage took Solana down for over 24 hours. Solana’s token fell from $141 to a low of a little over $94. In May, Solana experienced a seven-hour-long outage after NFT minting flooded validators and crashed the network.
A “record-breaking four million transactions [per second]” took out Solana and caused the price of its token to drop 7%, CoinTelegraph reported at the time, pushing it further into the red during the bruising onset of crypto winter.
In June, another outage prompted a 12% drop. The hours of downtime came after validators stopped processing blocks, immobilizing Solana’s touted consensus mechanism and forcing a restart of the network.
The outages were concerning enough for a protocol that sought to upend ether’s dominance and assert itself as a stable, rapid platform. Solana was experiencing growing pains in public. The project was first built in 2020 and is a younger protocol than ether, which went live in 2015.
Technology challenges are to be expected. Unfortunately for Solana, something else was brewing in the Bahamas.
The SEC called it “brazen” fraud. Bankman-Fried’s use of customer money at FTX to fund everything from trading and lending at his hedge fund, Alameda Research, to his lavish lifestyle in the Caribbean roiled the crypto markets. Bankman-Fried was released on a $250 million bond last week while he awaits trial for fraud and other criminal charges in the Southern District of New York.
Solana since November 2022, the month that FTX failed and filed for bankruptcy protection.
Solana lost more than 70% in total value in the weeks following FTX’s November bankruptcy filing. Investors fled from anything associated with Bankman-Fried, with prices for FTT (FTX’s native token), Solana, and Serum plunging dramatically.
Solana founder Anatoly Yakovenko told Bloomberg that rather than focusing on price action, the public should remain focused on “having people build something awesome that’s decentralized.”
Yakovenko did not immediately respond to CNBC’s request for comment.
FTT has fared the worst, losing practically all its value. But Solana has seen a continued flight in recent days, reflecting ongoing concerns about FTX contagion and skepticism about the long-term viability of its own protocol.
Developer flight is the most pressing concern. Solana’s raison d’etre was to solve bitcoin and ether’s struggle “to scale beyond 15 transactions per second worldwide,” according to developer documentation. But active developers on the platform have dropped to 67 from an October 2021 high of 159, according to Token Terminal.
Multicoin Capital, a cryptocurrency investment firm, has maintained a bullish stance on Solana. Even after the implosion of FTX, Multicoin continued to strike an optimistic tone about the suddenly beleaguered blockchain.
“We recognized that SOL was likely to underperform in the near term given the affiliation with SBF
and FTX; however, since the crisis began we’ve decided to hold the position based on a variety of factors,” Multicoin wrote in a message to partners obtained by CNBC.
Multicoin, and other prominent crypto voices, maintain that the fallout from FTX underscores the need for a return to basics for the crypto industry: A transition away from juggernaut centralized exchanges in favor of decentralized finance (DeFi) and self-custody.
An uptick in daily activity at now peerless Binance might suggest that many crypto enthusiasts have yet to take that missive to heart.
It’s unsurprising that Yakovenko continues to believe in Solana. Yet even Vitalik Buterin, the man behind ethereum, voiced his support for Solana on Thursday. “Hard for me to tell from outside, but I hope the community gets its fair chance to thrive,” Buterin wrote on Twitter.
Chris Burniske, a partner at a Web3 venture capital firm Placeholder, said he was “still longing” Solana in a Dec. 29 Twitter thread.
Crypto saw mass adoption thanks to centralized platforms like FTX, Crypto.com, and Binance. FTX splashed millions of dollars on stadium deals and naming rights. Crypto.com invested heavily in prominent ad campaigns. Even Binance announced a sponsorship tie-in with the Grammys.
2023 may prove a seminal year for defi, as crypto-curious investors look for safer ways to garner returns and custody their assets. Bitcoin was born out of the 2008 financial crisis. Now the cryptocurrency industry faces a test of its own.
“Lehman was not the end of the banking industry. Enron was not the end of the energy industry.
And FTX won’t be the end of the crypto industry,” Multicoin told investors.
– CNBC’s Ari Levy and MacKenzie Sigalos contributed to this report.
Palantir co-founder and CEO Alex Karp attends meetings at the U.S. Capitol in Washington on Oct. 18, 2023.
Jonathan Ernst | Reuters
With Palantir’s stock plummeting more than 11% this week despite a better-than-expected earnings report, CEO Alex Karp took aim at investors betting against the software company.
Karp, who co-founded Palantir in 2003, went after short sellers in two separate interviews on CNBC this week. After “Big Short” investor Michael Burry revealed bets against Palantir and Nvidia, Karp on Tuesday accused short sellers of “market manipulation.”
He repeated that message on Friday in an interview with CNBC’s Sara Eisen, again knocking Burry’s wager against the stock.
“To get out of his position, he had to screw the whole economy by besmirching the best financials ever … that are helping the average person as investors [and] on the battlefield,” Karp said.
Even with Palantir’s slide this week, the stock is up 135% in 2025 and has multiplied 25-fold in the past three years, an extended rally that’s lifted the company’s market cap to over $420 billion. While revenue and profit are growing rapidly, the multiples have shot up much faster, and the stock now trades for about 220 times forward earnings, a ratio that rivals Tesla’s.
Nvidia and Meta, by contrast, have forward price-to-earnings ratios of about 33 and 22, respectively.
In August, Citron Research’s Andrew Left, a noted short seller, called Palantir “detached from fundamentals and analysis” and said shares should be priced at $40. It closed on Friday at $177.93 after late-day gains pushed the stock into the green.
Palantir, which builds analytics tools for large companies and government agencies, reported earnings and revenue on Monday that topped analysts’ estimates and issued a forecast that was also ahead of Wall Street projections.
But the stock fell about 8% after the report and then slid almost 7% on Thursday. Karp told Eisen that the recent boom in Palantir’s share price isn’t just for Wall Street.
“We’re delivering venture results for retail investors,” he said.
While Palantir has in the past faced a fairly heft dose of short interest, there are currently relatively few investors placing big bets against it. The short interest ratio, or the percentage of outstanding shares being sold short, peaked at over 9% in September and is now at a little over 2%, which is about as low as its been since the company went public in 2020.
Still, calling out the doubters is a common occurrence for Karp, who has previously said on CNBC that people should “exit” if they “don’t like the price.”
In May, after the stock plummeted following earnings, Karp said ,”You don’t have to buy our shares.”
“We’re happy,” he said. “We’re going to partner with the world’s best people and we’re going to dominate. You can be along for the ride or you don’t have to be.”
The company has also faced backlash over its work with government agencies like U.S. Immigration and Customs Enforcement, and Karp has admitted that his strong pro-Israel stance led some people to leave the company.
The boisterous CEO has been particularly vocal this week. On Monday’s earnings call, he questioned how happy the people are who didn’t invest in the company, and told them to “get some popcorn.”
And on CNBC he aimed much of his ire at Burry after the investor revealed his short positions in Palantir and Nvidia.
“The two companies he’s shorting are the ones making all the money, which is super weird,” Karp told CNBC’s “Squawk Box” on Tuesday. “The idea that chips and ontology is what you want to short is bats— crazy.”
Affirm CEO Max Levchin said Friday that while the buy now, pay later firm isn’t seeing credit stress among federally employed borrowers due to the government shutdown, there are signs of a change in shopping habits.
“We are seeing a very subtle loss of interest in shopping just for that group, and a couple of basis points,” Levchin told CNBC’s “Squawk on the Street.”
At least 670,000 federal employees have been furloughed in the shutdown, and about 730,000 are working without pay, the Bipartisan Policy Center said this week.
Levchin said he’s closely watching employment data for signs of major disruptions, but the company is “capable” of adjusting credit standards when needed.
“Right now, things are just fine,” he said. “We’re not seeing any major disturbances at all.”
The federal funding lapse, which began Oct. 1, is the longest in U.S. history and has halted work across agencies with an impact beyond those who are government employees. The SNAP food benefit program, which serves 42 million Americans, has also been cut off.
The comments from Levchin followed a fiscal first-quarter earnings report that blew past Wall Street’s estimates. Affirm posted earnings of 23 cents per share on $933 million in revenue. Analysts polled by LSEG expected earnings of 11 cents per share on $883 million in sales.
Revenues climbed 34% from a year ago, while gross merchandise volumes jumped 42% to $10.8 billion from $7.6 billion a year ago. That surpassed Wall Street’s $10.38 billion estimate.
The fintech company, which went public in 2021, also lifted its full-year outlook, saying it now expects gross merchandise volume to hit $47.5 billion, versus prior guidance of $46 billion.
Affirm also said it renewed its partnership with Amazon through 2031. The company has also inked deals with the likes of Shopify and Apple in a competitive e-commerce landscape.
Long-time partner Walmart recently ditched Affirm for Swedish buy now, pay later firm Klarna, which went public in September after delaying its public offering due to market uncertainty caused by President Donald Trump‘s tariff plans. Worries of a pullback in discretionary spending due to tariffs ignited fears across the fintech sector.
Levchin said categories such as ticketing and travel have seen an uptick in interest, and consumer shopping remains strong. Active consumers grew to 24.1 million from 19.5 million a year ago.
“We’re every single day out there preaching the gospel of buy now, pay later being the better way to buy, and consumers are obviously responding,” he said.
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