The Solana crypto price crash started on 6 November 2022 amid FTX’s SOL dump speculations. However, the growing FUD around Solana’s token’s unstaking plan further fueled the crash as investors/traders expected the unstaked tokens to move to exchanges for a massive sell-off. To limit the Solana crypto price crash and lower the FUD, Solana Foundation has finally decided to postpone the process of unstaking, without specifying a date.
When did the Solana crypto price crash begin?
The FUD cycle started on 9 November with the on-chain tool Lookonchain informing the Twitter community about the ongoing unstaking.
Here is what the tweet read:
1/ A total of 18,775,348 $SOL ($330M) will hit the market after 23 hours.
In Epoch 370, 18.77M $SOL has been unstaked.
— Lookonchain (@lookonchain) November 9, 2022
As Solana crypto prices were already bleeding, Lookonchain’s revelation worsened the market sentiment—especially at the SOL’s counter. Solana INR price dropped to ₹1,020, leading to its exit from the list of top 10 cryptos by market cap.
Solana is currently ranked 12, behind Polygon and Polkadot, according to Coinmarketcap.
More about unstaking
Unstaking is a standard way for releasing tokens when a stake account or even a validator ceases to exist or loses validation rights. In Solana’s case, unstaking follows an Epoch—roughly a 2-day timeframe. Lookonchain’s Twitter thread revealed that SOL tokens worth $330 million will be unstaked by the end of Epoch 370—a specific timeframe.
What triggered users is the fact that unstaked tokens are open to withdrawals or can be sold. If sold, SOL tokens, numbering about 18,775,348 and worth $330 million, could push the prices even lower.
However, 18.77 million wasn’t the final SOL count, up for unstaking. It was 28.50 million SOL or 5.4% of the circulating supply.
Enter Solana Foundation
On 10 November, Solana Foundation tweeted saying that Hetzner—a cloud provider running Solana nodes—removed several validators due to policy changes.
On 11/2, Hetzner removed many of Solana’s independent validators in connection with a change of Hetzner’s policy. As a result, the Solana Foundation began the process of unstaking 28.5M SOL delegated to those validators as part of the Solana Foundation’s Delegation Program…
— Solana Foundation (@SolanaFndn) November 9, 2022
And that is why token unstaking started. The unstaked tokens were to be staked to other validator accounts in different locations. However, the market interpreted this as Solana whales leaving their positions to sell SOL tokens in bulk.
To check the price erosion and the resultant panic, the foundation has currently stalled unstaking—re-staking all of the 28.5 million SOL tokens. The foundation mentioned that all the to-be unstaked tokens as part of the delegation program are owned by them, and no third party can initiate staking or unstaking.
It appears the announcement has worked well for Solana crypto prices as SOL is currently trading up by 19% over the past 24 hours. However, the weekly loss still stands at 47.35%.