‘Full Irrational Panic’ – Solana Drops To Lowest Since August Amid Crypto Plunge

Solana prices have dropped sharply lately, shedding value along with many other digital assets as cryptocurrency prices reel from the latest developments.

The value of Solana’s sol token reached $43.22 around 4:50 p.m. ET, according to Messari data.

At this point, the digital currency was down roughly 30% over the last 24 hours and was trading at its lowest since August, additional Messari figures show.

The sol token suffered these declines at a time when many cryptocurrencies, including bitcoin, ether and Cardano’s ada token, were in the red.

Luna Crash

When explaining this market turmoil, several analysts pointed to Luna Foundation Guard’s recent decision to move over 80,000 bitcoin out of its reserves and onto exchanges, which it did in an effort to maintain the peg of its UST stablecoin.

Scott Melker, a crypto investor and analyst who is the host of The Wolf Of All Streets Podcast, spoke to the significant impact of this, stating that “the entire market is reeling.”

“I think that markets are in a full irrational panic,” he stated.

Melker elaborated, emphasizing the negative sentiment of many investors.

“The pendulum has swung to extreme fear, as it always does. This causes people to sell assets at or near the bottom.”

Additional Bearish Factors

Some experts cited several other variables as contributing to the recent weakness in the broader cryptocurrency markets, commenting on how these developments have combined with the LFG situation to drive losses.

“The digital asset market is generally unstable right now, mostly due to the volatility in equities,” said Brett Sifling, an investment advisor for Gerber Kawasaki Wealth & Investment Management.

“The Fed and inflation has caused market participants to worry and liquidity has fallen drastically,” he noted, speaking to the significant increases in consumer prices and the uncertainty around how aggressively Federal Reserve policymakers will tighten monetary policy.

“Luna’s mess has caused more distrust during an already volatile time, which has spilt over into other alt coins.”

Armando Aguilar, Head of Alternative Strategies for financial services firm Ledn, also spoke to the situation.

An “increase in treasury rates, macroeconomic forces and a strengthening U.S. dollar contributed in part to the decline in the overall crypto market,” he noted.

“The LFG sell off added additional selling pressure and contributed to additional fear on investors.”

Solana-Specific Considerations

While some analysts offered broader commentary, others offered more specific input, speaking to variables that would explain why sol, in particular, suffered such sharp declines lately.

“All the new L1 blockchain tokens have been really struggling since the end of 2021” said Gavin Smith, CEO of cryptocurrency services provider Panxora. He specifically mentioned the native digital assets of Solana, Fantom and Cardano.

“The space is becoming very crowded with lots of competing blockchains all offering broadly similar propositions and none of them appear, yet, to be mounting a serious challenge to the Ethereum blockchain for smart contract projects,” said Smith.

“This makes them much more susceptible to selling pressure during weak market conditions,” he stated.

Smith emphasized that Solana’s sol token was already in a vulnerable position when LFG opted to move more than 80,000 units of bitcoin to exchanges.

“The Luna collapse fuelled already negative sentiment that was present in these tokens. But that was the negative icing on the cake,” he noted.

“Solana was already down over 70% a week ago before Luna started its slide.”

“Our expectation is that when the recovery comes, that market will consolidate around 1 or 2 of these challenger chains, whether Solana will be in that mix is difficult to say,” Smith added.

Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and sol.