Everything you need to know about the FTX-Binance saga and how it affects SOL

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Solana, one of the main cryptos to have been affected by the turmoil surrounding FTX and Binance, is witnessing major price movements. Solana’s native token SOL is down 31.96% in the last 24 hours, according to CoinMarketCap data. It is trading at $14.12 as of 10 November 2022 at 3.38 pm.

As a result, SOL lost its spot among the top 10 cryptos by market cap to Polygon (MATIC).

The crypto moguls saga: A quick recap

Here is a quick account of the series of spats between FTX and Binance that led to SOL’s current market condition.

Binance and FTX are two of the largest centralized crypto exchanges in the world. The former was launched by Changpeng “CZ” Zhao in July 2017, and the latter by Sam Bankman-Fried and Gary Wang in May 2019.

Sam Bankman-Fried, aka, SBF, had also founded Alameda Research, a quantitative digital-assets trading firm in October 2017, before FTX, but a few months after Binance’s launch.

Now in those early days, CZ saw an opportunity in FTX and invested in the exchange. Eventually, in 2021, Binance exited its FTX shares for BUSD and FTT (FTX’s native exchange token) worth $2.1 billion.

Long story short: Binance ended up with a large amount of FTT tokens.

Then, on 2 November 2022, CoinDesk accessed the balance sheet of Alameda Research, the crypto research firm founded by SBF. And this is what showed up: A massive chunk of Alameda’s holdings were in FTT. Not Bitcoin, not fiat, but FTT. An asset that FTX itself had developed. That’s not quite right now, is it?

Besides, the balance sheet showed $6.1 billion worth of FTT holdings. This was surprising because only $5.1 billion of FTT are supposed to be in circulation, going by FTT’s issuance rate.

This is the point where two tracks combined. CZ didn’t like what he saw—a curious case of asset mismanagement and/or even misreporting on Alameda’s part. He took to Twitter and said that “due to the recent revelations,” the company is liquidating the FTT tokens they were holding. The ones they received from the divestment deal in 2021.

CZ had decided to get rid of all FTT in Binance’s books as a part of risk management.

Meanwhile, Alameda Research’s CEO Caroline Ellison tweeted that she would buy all the FTT tokens for $22 each. This way, she built a buy wall for FTT, which was otherwise on a free fall.

But how would Alameda fund the buy when most of its assets are only FTT? Well, the company also owns another coin in huge amounts—Solana.

It appears that Alameda has since been selling off SOL to protect FTT’s value.

Soon after, on 8 November 2022, SBF tweeted about Binance’s intention to acquire FTX.

The pending purchase was also confirmed by CZ in a subsequent tweet.

But, after due diligence, in less than 24 hours, Binance put out a statement signalling that the company would not be going ahead with the FTX acquisition. The tweet read:

“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com.”

What’s the latest on SOL

Since the FTX-Binance saga unraveled, SOL has been seeing a lot of panic selling. Several on-chain Twitter handles have posted about SOL being unstaked and sold, hinting at a further price drop.

For the unversed, unstaking doesn’t always mean that the tokens will find their way into exchanges and get sold. Unstaking might be for a number of reasons, as explained by the Solana Foundation.

For now, though, SOL seems to be recovering a little. SOL is up, with 24-hour dip contracting, to under 30%. The low was at $12.51 (around ₹1,020) and now it’s close to $15 (around ₹1,450).

The Solana community too seems to have managed to retain some of its positivity. They released a tweet saying that Solana’s network activity and validator growth are both expanding. Growing validator strength makes a decentralized ecosystem more secure. Currently, the Solana network has 3,621 nodes and 2,160 network validators.

While Solana is making some progress, it is always a good thing to keep the research going. Toward that end, you could use our Risk-O-Meter on the Solana page to help advance your understanding of the prevailing market conditions.

Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user’s own risk.

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