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Another Crypto "Coin" Clunks

FILE: Signage for the FTX Arena, where the Miami Heat basketball team plays, is visible Saturday, Nov. 12, 2022, in Miami. FTX effectively collapsed on November 11, with the Solana "croptocurrency" it touted crashing down in the market.

The Solana token, or SOL , has dropped 53.8% since the furor began unfolding on Nov. 2. By comparison, Ether has fallen about 20% and Bitcoin 19%.

The Solana cryptocurrency, which had been lauded by FTX's founder Sam Bankman-Fried, has been hit harder than any other major coin by last week's collapse of the exchange.

The exchange filed for bankruptcy on Friday after traders rushed to withdraw $6 billion from the platform in just 72 hours and rival Binance abandoned a proposed rescue deal.

The collapse of the company has seen more than $190 billion wiped from the value of the overall crypto market.

"This is what the old guys used to call 'blood in the streets'," said Martin Leinweber, digital asset product strategist at MarketVector Indexes. "There is no Fed or Treasury here to support prices, so the market simply cleans things up."

"In the current crypto shakeout, the most unfortunate innocent victim is the Solana ecosystem," said Stefan Rust, CEO of blockchain wallet company Laguna Labs. He and several other crypto players said FTX and sister firm Alameda Research likely sold a large amount of the coin in an attempt to stay afloat.

Many investors and app developers look to be leaving the Solana blockchain, which is widely used for decentralized finance applications; the number of SOL coins deposited there has fallen to 24.74 million, some way south of the 68.2 million seen in June, according to data from aggregator DeFiLlama.

Solana co-founder Anatoly Yakovenko tweeted that development company Solana Labs didn't hold any assets on FTX and had enough financial runway for around 30 months. Another co-founder, Raj Gokal, said this was a "crucible" moment for the ecosystem, adding "each time, we're stronger".

Nonetheless, uncertainty stalks the blockchain that's been dubbed an "Ethereum killer" in the past because of its lower transaction fees, faster processing speed and potential to scale.

"It's not the end for Solana," said Adam Struck, at LA-based venture firm Struck Capital. "It has established itself as a thriving ecosystem and competitor to Ethereum. But do I think valuation is a little frothy? Yes."

"It's much better for Solana that the connection with Sam Bankman-Fried's empire is ending now, even if the result is serious short-term pain," said Jack Saracco, co-founder of digital bank and payments solutions firm Ping.

SOL's market capitalization has shrunk about 55% since Nov. 2, from $11.6 billion to $5.1 billion, according to data from CoinGecko. Ether's market cap has fallen 21% to $150.7 billion, while bitcoin's has fallen 18% to $319 billion.

FTX and Alameda Research didn't respond to requests for comment.

Yet even amidst the blood-letting, there was some unexpected stability from stablecoins, which are pegged to the value of mainstream assets such as the U.S. dollar in an effort to reduce tame crypto volatility.

Despite the biggest stablecoin Tether having a brief wobble when it touched $0.985, according to CoinMarketCap, it managed to maintain its peg to the dollar, as did USDCoin , the second largest.