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Solana Returning to Pre-TerraUSD Levels? How We Got Here

Last Updated November 20, 2023 3:48 PM
Josh Adams
Last Updated November 20, 2023 3:48 PM
Key Takeaways
  • Solana had one of the worst 2022’s of the big-cap cryptos.
  • But its recent rise has been equally fascinating.
  • We spoke to industry insiders on crypto’s comeback kid.

What a difference a year makes. After cratering from its all-time high of $260 in November 2021 to less than $10 in June 2022, Solana (SOL) has staged a remarkable comeback.

Its price now hovers around $60, making up most of the distance to its pre-TerraUSD collapse valuation of $92.

How Solana Crashed

The successive crises of 2022 nearly wiped out the once-hyped “Ethereum killer.” Two events in particular – the implosion of TerraUSD and the bankruptcy of FTX – sent SOL prices into freefall. Confidence and interest evaporated.

But over the last few months, Solana has quietly rebuilt itself behind the scenes.

When TerraUSD de-pegged in May 2022, it triggered a loss of faith across cryptocurrencies. Billions exited the market in panic, and “algorithmic stablecoins” faced intense backlash. As a leading Layer 1 blockchain closely tied to stablecoin projects, Solana suffered mass liquidations. The price sank from $80 to $38 in three weeks.

Then came another bombshell, the collapse of Sam Bankman-Fried’s FTX empire in early November 2022. Bankman-Fried was one of Solana’s staunchest supporters , with his trading firm Alameda Research holding over $1 billion in SOL tokens. FTX’s bankruptcy and his arrest for fraud saw prices plunge below $14.

Between these two sentinel events, Solana lost almost 95% of its value from peak to trough. Its network activity stagnated, supporters turned critics, and some questioned whether it could recover.

The Comeback

However, the underlying technology and infrastructure remained strong. Throughout the chaos, the Solana Foundation and its delegates kept building. Efforts accelerated to diversify the validator network, ensure better decentralization, and strengthen the censorship resistance of Solana’s proof-of-history consensus.

Quietly, market confidence returned. The price crossed back above $20 in late December 2022. After sideways consolidation, an uptrend formed in October 2023. FOMO kicked in above $40, and SOL now trades around $60. 

Solana (SOL) has had a great October and November.
SOL has had a fantastic comback since mid-October. Source: CoinMarketCap

How We Got Here & Where It’s Going

Industry voices see Solana’s phoenix-like resurgence as a validation of its underlying technology strengths cultivated during the bear market. “A significant factor contributing to its current and anticipated success is its historical performance,” says Conrad Young, co-founder of Athena Labs, to CCN.

“During the DeFi Summer of 2021, Solana offered many people a means to interact with crypto without facing the major drawbacks of Ethereum, such as high transaction fees, slower processing times, and a more costly token.”

Young projects a potential $95 price target for SOL by year’s end.

On-chain data signals growing network activity according to Nansen  analyst Martin Lee, “We’re starting to see an uptick, with daily active addresses going back above 200k in a couple of days.”

The ecosystem’s relentless building efforts, including hackathons, amidst past price dumps are now bearing fruit. Step Finance’s George Harrap told CCN: “This rally just underpins all the work that’s been going on during the bear market… Many of these [hackerhouse events were] happening monthly, with many of them fueled by hackathons being run and bounties from the ecosystem. This created a lot of builders making products.”

Tether Printing & ETF Hype Helping Too

Broad crypto market tailwinds like Tether printing are also benefiting SOL, says Siam Kidd, founder of The Realistic Trader. With a Bitcoin ETF likely in 2024, he sees substantial growth for Solana, although, after a potential brief pullback.

“Since October there has been $5.7 Billion new Tether printed and that has pushed nearly all crypto prices up,” he told CCN. “It’s hard to gauge where SOL will be by the end of the year, but as it’s over-extended at the moment, I wouldn’t be surprised to see at least a 20% pullback and then a lot more growth in 2024.”

SOL TVL is up substantially since September.
Solana’s (SOL) TVL since July 2023. Source: DefiLlama

Finally, the Bitrue  Research team, also speaking to CCN, points to Solana’s booming DeFi sector, with 250% TVL growth since September. They cite bullish anticipation of a Bitcoin ETF approval in January as potentially catapulting SOL to $80-$100 levels.

Of course, risks still abound in this volatile market. And analysts debate whether the current pump is overextended. Yet Solana has come a long way from the dark days of 2022. Its network metrics look increasingly healthy compared to rivals. For loyal HODLers who stuck it out, some gleam of hope emerges. Their patience may soon be rewarded.

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