Is Solana Safe from Price Drops?

• Amid FTX’s bankruptcy proceedings, analysts assess the impact of selling over $1 billion in SOL. 
• The Solana Foundation continues to issue 645,000 SOL monthly until 2028, although this is a small portion compared to the market cap.

Amid ongoing bankruptcy proceedings involving the cryptocurrency exchange FTX, analysts are closely examining the potential consequences of FTX’s plan to liquidate its substantial cryptocurrency holdings, which include over $1 billion in Solana (SOL). While concerns have arisen about the effect of this significant sell-off on the cryptocurrency market, particularly on the SOL price, a closer look reveals factors that may mitigate any adverse effects.

Restricted Weekly Liquidation Quota Eases Concerns

One of the key factors alleviating concerns regarding FTX’s liquidation is the limitation placed on the exchange’s weekly cryptocurrency sales. Regulators have granted FTX permission to sell cryptocurrency worth up to $100 million.

This restriction, despite FTX holding a substantial 16% of the circulating supply of Solana, is mitigated by the fact that a significant portion of the SOL holdings is locked up and inaccessible for several years. Specifically, over 7.5 million SOL tokens sold to FTX and its partner firm Alameda will remain locked until 2025.

Majority of Solana is locked until 2025
Read carefully pic.twitter.com/9xHC6WJ3JV

— D ᴜ ɴ ɴ ᴏ ᴏ (@dunnooworld) September 10, 2023

Solana Foundation’s Ongoing Token Issuance

Another crucial element in this equation is the Solana Foundation’s continuous token issuance schedule. The foundation is steadily releasing approximately 645,000 SOL per month, and this issuance is to continue until 2028. While this monthly issuance contributes to the overall supply, its relative scale is modest compared to Solana’s substantial market capitalization.

Market analyst George Tung expresses confidence that the crypto market, including the SOL price, will not experience a significant downturn due to FTX’s bankruptcy proceedings. Tung emphasizes that the market should be able to absorb the relatively modest amount of SOL that FTX intends to sell, considering the constraints and the ongoing token issuance by the Solana Foundation.

Current Solana Price Action

To further strengthen Tung’s confidence in the market’s resilience, it’s noteworthy that the price of SOL has shown strength in response to this news. Over the past 24 hours, SOL has experienced a slight increase, at one point surpassing the $19 mark. This suggests that many investors remain undeterred by the prospect of FTX’s liquidation.

While Solana’s price has indeed declined by approximately 36% over the past 30 days, it’s essential to understand that SOL is not unique. Many other cryptocurrencies, including Polygon and Litecoin, faced similar market conditions during this period.

It’s important to consider that FTX, as a significant player in the cryptocurrency market, has a vested interest in preserving overall market stability. Therefore, it is reasonable to assume that FTX will implement a cautious liquidation strategy to minimize adverse impacts on cryptocurrency prices. George Tung emphasizes that FTX’s intention is not to engage in reckless selling that destabilizes the market, as such a strategy would be detrimental to their interests.

While the bankruptcy proceedings of FTX and its significant cryptocurrency holdings, particularly Solana, have elicited concerns within the cryptocurrency community, several factors suggest that the market is well-equipped to withstand potential shocks. FTX’s limited weekly liquidation quota, the lock-up of a substantial portion of SOL, and the ongoing token issuance by the Solana Foundation collectively contribute to the market’s resilience.

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