Is This Good For Ethereum? Solana's Market Value Has dropped $20 Billion After Outage.
Although it's been one of the year's fastest-appreciating cryptocurrencies, Solana's sol token has given up much of its massive gains this week, plummeting more than 35% from last week's record high following a network outage that some experts believe could bolster the case for more-established platforms like Ethereum.
- Sol fell as much as 10% to $135.25 on Friday, marking the token's lowest level in nearly two weeks and lowering its market capitalization to $40.6 billion, down more than $20 billion from its September 9 high.
- Though the token initially rose during last week's crypto crash, it began to fall over the weekend as the broader market struggled to recover its losses, with the selloff quickly intensifying Tuesday morning after a spike in transaction volume and bot activity caused outages on Solana's network for more than 17 hours.
- Solana said in a statement that the influx of transactions caused the network's engineers to be unable to address the issue, so a group of core developers chose to upgrade and restart the network, which helped restore the blockchain's operation early Wednesday morning.
- In a Friday note, Oanda analyst Edward Moya stated that Solana's outage and subsequent fix demonstrated that the company is "far from unstoppable" and that it is not as decentralised or self-sufficient as some investors may have assumed.
- He believes that sol's recent price declines will help Ethereum maintain its leadership in the short term, and that this will be "good news" for other blockchains that support smart contracts, the self-executing agreements that underpin the buzzy non-fungible tokens and decentralised finance technology.
- Since the outage, Ethereum prices have risen around 4%, but their return of about 370 percent this year pales in contrast to Solana's nearly 7,800 percent.
Following the failure, a number of cryptocurrency specialists rallied to Solana's defence, with some even pointing to similar issues during Ethereum's early implementation. "We're still in the early days of constructing fast, scalable blockchains," Cornell University computer science professor Emin Gün Sirer tweeted on Wednesday, adding, "Issues can happen."
Meanwhile, despite recent volatility, Kyle Samani, a managing partner at cryptocurrency investment firm Multicoin Capital, said on Friday that developer activity and money flow on Solana's blockchain are still growing at a "astonishing rate," making the nascent platform one of the strongest Ethereum competitors.
"I don't believe [Ethereum] can be displaced, but it's evident that Solana will coexist alongside it," Samani told cryptocurrency investor Anthony Pompliano.
Solana says it will continue to deploy solutions to assist prevent future instability, and that a "full post mortem" on the outage would be provided in "the coming weeks."
Solana's spectacular rise this year has sparked interest in a plethora of altcoins, or cryptocurrency alternatives to market leaders bitcoin and ether. Solana's support for smart contracts has enabled it take advantage of the expanding market for NFTs, which had record-breaking sales of $900 million last month, alongside cryptocurrencies like Binance coin and Cardano's ada.
While some see the rise as a logical step toward acceptance, others are sceptical that the rising altcoins are making long-term gains. JPMorgan analysts noted in a note earlier this month that bitcoin's shrinking proportion of the cryptocurrency market likely indicates "froth and retail investor hysteria," noting that such mania has typically resulted in almost 50% price declines.