In the wake of the FTX tremors, the Solana Blockchain is set to un stake nearly $800M in SOL tokens

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Written by

William Miller
Published on

November 10, 2022

Key points: 

  • Solana validators will release their nearly $800 million worth of SOL holdings near the end of the token lock-up period.
  • Tokens scheduled to be unlocked represent approximately 15% of the circulating token supply at one unlock.
  • SOL’s funding rate dropped sharply to -4% on Wednesday in anticipation of unlocking.

Earlier this week, crypto market analysts began speculating that Alameda might need to sell some of its SOL tokens to increase liquidity as concerns about the financial health of the two companies began to mount. Fear drives SOL prices lower - as traders rush to overcome the selling pressure.

Now the momentum has apparently risen to another level: Solana validators who provide security for the blockchain will release their nearly $800 million worth of SOL holdings near the end of the token lock-up period (known as "Epoch 370").

Analysts are speculating whether investors will throw away these soon-to-unlock SOL tokens once they get back. The price of SOL has dropped 42% in the past 24 hours to less than $14.

"A reduction in the number of SOLs deployed could indicate that investors are looking to sell all or part of their positions," Sean Farrell, head of digital asset strategy at research firm FundStrat, wrote in a note Tuesday night after the rescue news. "Based on these factors, we believe it is prudent to reduce exposure to Solana (SOL) in the near term."

Solana Compass blockchain data shows that approximately 55 million SOL tokens will be unlocked, worth approximately $776 million.

Currently, approximately 76% of eligible SOL tokens are staked on the blockchain. Tokens scheduled to be unlocked represent approximately 15% of the circulating token supply at one unlock.

Riyad Carey, a research analyst at crypto data firm Kaiko, told on Monday that SOL is Alameda's second-largest holding and also holds a large number of SOL ecosystem tokens such as MAPS and OXY. According to CoinGecko, MAPS recently lost 20% to $0.1, while OXY lost 14% to $0.03.

An "epoch" on the Solana blockchain refers to a period of time during which staking rewards are earned and used. Validators protect their shares in the blockchain during this period, which lasts about two days and can unlock tokens after the epoch ends.

Solana’s price decline accelerated on Tuesday when major cryptocurrency exchange Binance first said it intends to buy FTX, and continued on Wednesday that thet may not be able to complete the acquisition. Last week's report stated that a copy of Alameda’s balance sheet showed that the company held $292 million in unlocked SOL, $863 million in locked SOL, and $41 million in “SOL collateral.”

According to Coinglass, SOL’s funding rate dropped sharply to -4% on Wednesday in anticipation of unlocking.

SOL's funding rates dropped on Wednesday. (Coinglass)

SOL's funding rates dropped on Wednesday. (Coinglass)

FundStrat’s Farrell said he expected there is an ability for the Solana ecosystem to “eventually recover and remove itself from Alameda’s shadow.”

“But the current liquidity overhang is quite substantial,” he said.


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