A guilty verdict last week for Sam Bankman-Fried could prove additional good news for holders of a token long linked to the former FTX CEO that’s already up more than 300% in 2023.
The Solana blockchain, and its native token SOL, was created in 2020 as a faster, cheaper alternative to Ethereum. Bankman-Fried was once a major backer of Solana and called SOL the “most underrated” token. At its peak in 2021, the cryptocurrency was worth as much as $260, but while SBF’s support was once a boon for the token, it later weighed it down.
In the days leading up to FTX’s bankruptcy, Solana’s price plummeted by more than 60%. And by the time Bankman-Fried was arrested and extradited to the U.S., the coin was trading at about $10, down 94% compared with its price at the start of 2022.
Yet, despite a short-term setback after the token was mentioned frequently during Bankman-Fried’s trial in early October, Solana has mostly been trending upward. The coin is up 20% over the past seven days, and, since January, its price has increased 340%, according to CoinGecko. As of Tuesday afternoon, it was approaching $44.
The increase is a welcome reprieve for organizations that support the Solana network, including Solana Labs, which builds products and tools for the ecosystem. The company tried to distance itself from SBF following FTX’s collapse, with cofounder Raj Gokal telling Fortune in May that the FTX meltdown was “pretty far in the rearview mirror”.
Since then, several developments have helped increase investor optimism for the token and its underlying network. The most recent is last week’s announcement of the launch of Firedancer, a validator client on Solana’s testnet meant to increase the network’s throughput substantially.
Solana’s planned upgrades, along with far fewer downtime incidents compared with last year, also have convinced some analysts of its growing potential.
Matthew Sigel, head of digital assets research at the ETF and mutual fund manager VanEck, said Solana is undervalued and could be the first blockchain to host an application with 100 million users.
“It’s fair to say they’ve moved beyond the FTX overhang,” Sigel said.
Solana has also seen positive signs from investors in digital assets, who poured in about $35 million over the past two weeks, according to CoinShares. And in an October CoinShares survey of 58 investors who cover more than $500 billion of assets under management, Solana ranked third behind Bitcoin and Ether among digital assets with the most compelling growth outlook.
Still, other analysts like 3iQ head of research Mark Connors are doubtful the planned upgrades are the main reason behind Solana’s recent comeback. Connors pointed out that the large expected sale of SOL from FTX’s portfolio never materialized, which may have accounted for the token’s large inflows in October. Some credit may also be due to Solana’s fanbase.
“The ‘Ethereum slayer’ has a large and loyal constituency,” Connors said in an email. “So no bad news paired with a largely oversold SOL in 2022 makes it reasonable to expect some overshoot vs. other [altcoins] in 2023.”