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Bulls are not in a hurry to return despite the 29% decline in SOL price since August.
As the market capitalization of altcoins fell by 16% over the past 80 days, cryptocurrencies have seen a modest bear market. The United States Federal Reserve’s quantitative tightening, rising interest rates, and suspension of asset purchases can all help to explain some of the downward movement. Despite its intent to reduce inflationary pressure, the strategy raises the cost of borrowing for both consumers and enterprises. Even worse, Solana’s SOL token has suffered a 29% correction since August, making its demise even more painful. Although the smart contract network prioritizes speed and minimal prices, the frequent outages point to a centralization problem. On September 30, a misconfigured validator stopped blockchain transactions, which was the most recent setback. The network forked as a result of a duplicate node instance because the surviving nodes could not agree on the right chain version.
A public blockchain network called Solana features smart contract functionality. SOL is its native cryptocurrency. In a white paper written by Anatoly Yakovenko and released in November 2017, Solana was recommended. This essay discussed a method known as “evidence of history.” Solana’s first block was made on March 16, 2020. On August 3, 2022, it was revealed that 9,231 Solana wallets had been impacted by hackers who had targeted the Solana ecosystem. Victims were defrauded of a total of $4.1 million via four Solana wallet addresses. Affected wallets were all created, imported, or used at some time in the Slope wallet apps for iOS and Android. Security experts found that Slope wallet sent sensitive account information in clear text to its remote servers.
Anatoly Yakovenko, a co-founder of Solana, just hedged on Firedancer, a scaling solution created by Jump Crypto in collaboration with the Solana Foundation. The technique, which has been dubbed the long-term solution to the network outage issue, ought to be prepared for testing in the upcoming months. Mango Markets, a decentralized financial exchange situated in Solana, was the victim of a $115 million hack on October 11. The attacker obtained “large loans” from Mango’s treasury by successfully manipulating the value of the MNGO native token collateral.
Early in November, Solana’s main decentralized application metric began to show signs of weakening. The amount placed in the network’s smart contracts is measured by the total value locked (TVL), which dropped to 30.4 million SOL, the lowest level since September 2021. Other variables also have an impact on Solana’s declining value and TVL. Investors should examine the number of active addresses in the ecosystem to ascertain whether DApp adoption has indeed declined. According to DappRadar statistics as of October 19, 13 out of the top 20 DApps saw a decrease in the number of Solana network addresses communicating with them. The futures markets for SOL also reflected the decreased interest.
Because investors need more money to hold back the settlement, fixed-month contracts typically trade at a modest premium to spot markets. Backwardation is a condition that occurs when this indicator fades or turns negative; this is an unsettling, bearish red flag. While the precise cause of Solana’s price decline is unclear, certainly, centralization problems, a decline in the network’s DApp usage, and waning interest from derivatives traders all played a part. If public opinion changes, deposits ought to start coming in, raising Solana’s TVL and the number of active addresses. Solana holders should not anticipate a price bounce any time soon, according to the aforementioned data, since the network health measures are still under pressure.