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The fall of Solana in 2022 and discover the reasons behind its significant decline from an all-time high of $259 that teaches DOs and DON'Ts to every project.
Last updated Jan 12, 2023 at 02:08 AM
Posted Jan 10, 2023 at 07:22 PM
In November 2021, Solana experienced an all-time high of over $259. However, by the end of 2022, the cryptocurrency had crashed by 96%, trading below $10 and ranking 17th on CoinMarketCap. Last year was an extremely bearish market for crypto, with billions wiped off the market cap since the start.
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Bitcoin, for example, which was trading above $45,000 at the beginning of the year, ended the year at $16,000, while Ethereum dropped from $3,000 to $1,200. Most cryptocurrencies lost between 60% and 80% of their value throughout this bear market, and Solana was no exception. In particular, Solana lost over $50 billion of its market cap - more than any other crypto. The exact reason for Solana's decline is difficult to pinpoint, but it is likely due to the general market sentiment of the year.
Let’s try to find out what put Solana among the worst performers of 2022.
Bitcoin is often considered the bellwether of the the cryptocurrency market, meaning that its price movements can have a significant impact on the prices of other cryptocurrencies, commonly known as altcoins. When Bitcoin's price goes down, the entire market can get dragged down with it, as many investors may choose to sell off their altcoin holdings in favor of holding onto or purchasing more Bitcoin.
In 2022, Bitcoin experienced a significant price decline which dragged the entire market down with it. There could be several reasons behind this decline. Firstly, the markets were in a period of high volatility, with investors and traders constantly re-evaluating the value of assets and moving money in and out of different investments. Such volatility can lead to sharp price movements and can make it difficult for investors to predict the future direction of prices.
Another factor that could have contributed to the decline of Bitcoin price is profit-taking by large holders, Due to the run-up in price in late 2021 and early 2022, many large holders of bitcoin, who had invested in the cryptocurrency earlier chose to take profit. The selling of Bitcoin by these large holders may have created panic in the market, which caused a fall in the market price of other crypto coins as well.
Additionally, there was regulatory uncertainty. Announcements of new crackdowns on the crypto market by governments, and reports of potential new laws that could affect cryptocurrency transactions can create uncertainty and make investors more hesitant to hold onto or invest in cryptocurrencies.
Overall, the decline of Bitcoin in 2022 can be attributed to a combination of market volatility, profit-taking by large holders and regulatory uncertainty all of which collectively caused the fall of the entire crypto market.
This was one of the major reasons that brought down the other altcoins along with Solana. The only difference is, other coins lost 50-60% in 2022 while Solana is 87% down.
Solana recorded its all-time high at the same time as Bitcoin did; indeed, Solana gained more than any other altcoin. However, the Solana holders were probably the paper hands as Solana couldn't hold the price and lost almost all of its value in the bearish market of 2022.
FTX was one of the top Solana investors and FTX's SBF was the reason why anything was successful with Solana. When FTX collapsed, it apparently pulled its money out, causing Solana to nose-dive.
The FTX collapse impacted Solana more than any other coin due to its association with the FTX ecosystem.
When FTX invested in Solana, it gave the coin a lot of attention and confidence from investors, which caused the value of the coin to rise. However, when FTX collapsed, many investors lost faith in the coin and began to sell off their holdings, resulting in a decrease in the value of Solana. Investors no longer had faith that FTX's investment in the coin was a safe and profitable one. As a result, the value of the Solana coin decreased as investors moved their money away from the asset.
Though there's not much connection between FTX and Solana now, its prior association with a failed ecosystem will keep haunting the Solana investors.
Solana is a blockchain platform designed to provide high-throughput, low-latency solutions for use cases such as decentralized finance (DeFi) and gaming. It has been successful in attracting developers to build on its platform; however, recently developers have been leaving the platform due to a lack of scalability and high transaction fees.
Loss of developer interest in Solana is greatly impacting the entire ecosystem.
This development has caused the price of the Solana token to go down, as fewer developers are creating applications on the platform. Additionally, the lack of scalability and high transaction fees have discouraged users from using the platform; this trend has further contributed to the decrease in price.
The activity on the Solana chain has come to a halt. Moreover, Solana's top NFT projects DeGods and Y00ts have announced that they will move to Ethereum Blockchain in 2023.
Another reason for Solana's diminishing value was a wallet hack due to compromised private keys. Solana lost millions to this hack and FUD in the August last year.
Solana is standing at its critical support level. It has recently visited the $7 price mark mark but quickly jumped back to $16. Solana has critical support level at $10, the support level of March 2021.
Solana is currently trapped in the $8- $20 range zone and it has local resistance at $30 once it breaks out positively from this zone. Once it is above this resistance level, it might get trapped in the upper range zone.
Solana must regain investors' trust and try not to pump overnight again. Solana's price decrease of 96% from its all-time high can be attributed to a variety of factors, such as high competition from other cryptocurrency projects, a lack of liquidity, and general bearish sentiment in the market. Though the project has had its fair share of challenges, the future of Solana remains optimistic.