Solana’s TVL Plummets as Lido Finance Exits the Ecosystem

Solana saw its Total Value Locked (TVL) plummet by a staggering $100 million in just 24 hours, as Lido Finance discontinued its services on the blockchain.

In the fast-paced world of blockchain and cryptocurrency, even the most prominent platforms can experience unexpected twists and turns. Solana, recognized for its high-speed and low-cost transactions, recently faced a significant setback as its Total Value Locked (TVL) took a staggering hit, plummeting by $100 million in a single day. This abrupt decline coincided with an announcement from Lido Finance, a well-known liquidity staking platform, declaring its departure from the Solana blockchain.

In related news, the FTX estate boldly staked over 5.5 million SOL on 13 October 2023. This move by the estate, a key player in the cryptocurrency space, sent shockwaves through the community, shedding light on the dynamics of the cryptocurrency market and the evolving story of FTX. As the cryptocurrency world continues to evolve, the implications of this significant stake by FTX and its ongoing legal battles add layers of complexity to the ever-changing landscape.

Solana Bids Adieu to Lido

Lido Finance, a respected provider of liquid staking services, delivered the surprising news confirming its intention to cease operations on the Solana network over the coming months. Lido Finance is a significant player in the blockchain space, ranking as the third-largest protocol on Solana and maintaining a presence on five different blockchain networks, including Ethereum. The decision to discontinue its Solana services was reached following extensive discussions within the Decentralized Autonomous Organization (DAO) forum and a subsequent community vote. In an official statement, Lido Finance explained, "The sunsetting of the Lido on Solana protocol was approved by Lido token holders, and the process will begin shortly."

The primary catalyst for this decision was a proposal put forth by P2P Validator, a key contributor to the Solana ecosystem. This proposal laid out the challenges and future prospects of Lido Finance's presence on the Solana blockchain. The DAO extensively deliberated on whether to continue Lido's operations on Solana with the backing of the treasury or to discontinue services altogether. As a result of this decision, users of Lido's staking services on Solana, known as stSOL holders, will continue to receive network rewards throughout the process of discontinuation. Lido Finance ceased accepting new staking deposits on Solana as of Monday, initiating node off-boarding on 17 November 2023, with front-end support scheduled to cease on 4 February 2024.

Solana TVL Loses $100 Million

Data from defiLlama, a prominent decentralized finance tracking platform, paints a stark picture of Solana's recent financial turbulence. The platform, which boasted a TVL of $313 million on 16 October 2023, experienced a precipitous drop, with the figure plummeting to just $210 million on Tuesday. What makes this development particularly intriguing is that during the same timeframe, Lido Finance witnessed a positive change in its TVL. The liquidity-staking dApp, which currently dominates approximately $56.4 million of Solana's TVL, recorded a notable 7% increase in just 24 hours.

Solana's TVL decline occurred concurrently with Lido Finance's decision to sever its ties with the platform. This decline is noteworthy, especially considering that Solana had been experiencing a positive price movement over the previous 24 hours.

As the substantial loss of TVL on Solana continues to raise eyebrows within the cryptocurrency community, there are currently no other apparent factors to account for this dramatic decline. This situation warrants close monitoring, particularly in light of Solana's recent TVL increase over the past week, which defied the overall sluggish performance of the altcoin market. While the recent strong price action on Solana offers a glimmer of hope for the chain in the short term, the long-term ramifications of Lido Finance's exit remain uncertain and will undoubtedly be a topic of intense scrutiny in the blockchain industry.

FTX Estate Bullishly Stakes 5.5 Million SOL

Meanwhile, the FTX estate, known for its significant presence in the cryptocurrency market, recently demonstrated its bullish sentiment towards Solana (SOL) by staking an impressive 5.5 million SOL on 13 October 2023. According to on-chain data, an FTX-identified wallet initiated the transaction, sending these substantial holdings to Figment, a staking validator firm catering to institutional investors.

The transaction, initially detected by the blockchain tracker Whale Alert, raised eyebrows in the cryptocurrency community and was later identified as belonging to the FTX estate by the pseudonymous on-chain researcher known as Ashpool. These staked coins have a current market value of approximately $122 million, representing only a fraction of FTX's overall holdings of SOL.

Staking in the cryptocurrency realm involves locking up a specific amount of coins for a predetermined period. In return for securing the network through their stakes, participants receive SOL coin rewards. This approach not only supports the Solana network's security but also provides stakers with additional incentives.

FTX's faith in Solana extends back to its early investment in the project, and the exchange consistently receives a substantial volume of unlocked SOL, adhering to an established vesting schedule. The FTX estate, under the oversight of a bankruptcy trustee, retains the option to liquidate these holdings at its discretion. The primary mission of the estate is to recover assets for distribution among FTX's creditors.

In a significant development in September, a United States court granted approval for the sale of $1.3 billion worth of SOL from FTX's holdings. This decision initially caused concerns among market participants, fearing a potential price slump. To mitigate any adverse impact on the cryptocurrency market, the bankruptcy court mandated that the sale occur through an investment adviser in weekly batches. Consequently, SOL's price experienced a temporary dip, hitting a two-month low of $17.34 on 11 September 2023.

FTX, as a prominent player in the cryptocurrency space, holds a diverse portfolio of digital assets, including but not limited to Solana, Bitcoin, Ethereum, Aptos, and various other cryptocurrencies. Court filings from September indicate that over $7 billion has been successfully recovered since FTX filed for bankruptcy protection in November 2022.

It is important to note that Sam Bankman-Fried, the co-founder of FTX, currently faces a trial at a district court in Manhattan. He stands accused of fraud and conspiracy to commit fraud, with the potential of serving up to 115 years in prison if found guilty. This ongoing legal battle adds an additional layer of complexity to the broader FTX story, making the exchange's recent bullish move in Solana even more intriguing to market observers.

Price Overview

Data from the cryptocurrency price tracking website CoinStats indicated that SOL suffered a 1.67% loss over the past day of trading. Consequently, the altcoin was changing hands at $23.58 at press time. Notably, the recent drop in price was not enough to flip SOL’s weekly performance into the red. As a result, the cryptocurrency’s price was still up 8.73% over the past 7 days.

Price chart for SOL (Source: CoinStats)

In addition to weakening against the Dollar, SOL was also outperformed by the leading cryptocurrency Bitcoin (BTC) throughout the past 24 hours. CoinStats data showed that SOL was down 0.75% against BTC. This meant that 1 SOL token was worth 0.00083529 BTC.