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Blockchain/Level VIII · The memecoin age/8.1 Solana's story/Lesson 4

FTX and Solana’s near-death

One company’s balance sheet and a chain that nearly died

MaterialsCoinDesk reporting on FTX’s collapse and SOL price action (November–December 2022)Bloomberg coverage of the FTX bankruptcy filing and its impact on crypto marketsSolana block explorer or historical price chart for SOL from November 2021 to December 2022

Wonder

  1. How can an exchange’s internal ledger become a primary source of liquidity for an entire blockchain ecosystem?
  2. Why did the collapse of FTX cause Solana’s price to fall more than 95% from its peak within weeks?
  3. What makes a dependency between a company and a chain invisible until that company fails?

Explore

  1. Solana’s early growth was heavily funded by Alameda Research, the trading firm of FTX founder Sam Bankman-Fried. Alameda held a significant portion of the SOL supply and provided capital to many projects in the ecosystem. This created a structural link: when Alameda traded, it moved large amounts of SOL; when it invested, it launched new protocols on Solana. The chain’s market depth was partly an artifact of one firm’s balance sheet.
  2. Serum, the on-chain order-book exchange that FTX and Alameda launched in 2020, sat at the centre of Solana’s trading in 2021–22. Its program’s upgrade key was controlled by FTX, so when FTX collapsed in November 2022 developers feared the key was compromised and forked the code as OpenBook. The exchange that symbolised Solana’s utility depended on one company’s key.
  3. FTX filed for bankruptcy on 11 November 2022. SOL, which had traded above $250 in late 2021, fell below $30 within days of the filing. By 28 December 2022, it traded under $10, reaching lows around $8. That represented a drop of more than 95% from its peak. The fall reflected fear that FTX and Alameda’s large SOL holdings, much of them locked, would be sold, and the loss of the ecosystem’s biggest backer.
  4. The collapse followed a run of network outages through 2022, which had already eroded confidence (lesson 7.1.6). Projects left the ecosystem; developers paused work. The Solana Foundation disclosed about $1 million in cash stuck on FTX; its direct exposure was small, but the link in the public mind was not. For several weeks, the narrative was that Solana was a chain built on a single firm’s credit line, and that credit had failed.
  5. The critical mechanism here is dependency opacity. While FTX operated normally, its holdings in SOL were indistinguishable from organic market supply to most observers. The concentration was visible only to those who tracked wallet addresses closely. When the firm collapsed, the full weight of that concentration hit the market at once. A chain’s health can depend on one entity’s balance sheet without any warning signal in the protocol itself.
  6. To trace this history, open a block explorer or price chart for SOL and mark the dates: November 2021 (peak above $250), 11 November 2022 (FTX bankruptcy filing), 28 December 2022 (price below $10). Note that the steepest decline occurred in the first two weeks after the filing, not gradually over months. The speed of the drop reflects how quickly a concentrated holder’s exit can move a market.

Key facts

  • Alameda Research held a large share of SOL supply and funded many Solana ecosystem projects before FTX’s collapse.
  • Serum, Solana’s leading decentralized exchange in 2021–22, was developed by a team closely tied to FTX and Alameda.
  • FTX filed for bankruptcy on 11 November 2022; SOL fell below $30 within days of the filing.
  • On 28 December 2022, SOL traded under $10, with lows around $8, more than 95% below its 2021 peak.
  • Network outages through 2022 (lesson 7.1.6) compounded the market decline and developer departures.
  • FTX’s estate held approximately 41 million SOL at bankruptcy, much of it locked until sale in April 2024.

Exercise nine, six, three, one

9CollectList 9 facts about the relationship between FTX/Alameda and Solana from November 2021 to December 2022: holdings, projects funded, price movements, outages, developer activity changes.
6ClusterGroup the 9 facts into 6 categories: capital concentration, ecosystem dependency, market impact, protocol stability, developer confidence, or structural opacity.
3DistillReduce the 6 categories to 3 core reasons why FTX’s collapse nearly killed Solana. Focus on how one firm’s balance sheet became a chain-level risk factor.
1CrystallizeWrite 1 sentence explaining why a dependency between a single company and a blockchain is invisible until that company fails, and what that implies for any token whose supply is concentrated among few holders.

Fact check

Dates, figures and claims checked against the published sources listed below.

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