financemagnates.com
Solana (SOL), also known as the 'Ethereum Killer' suffered from heavy losses since November 2021. At its peak Solana was trading at $260 (approx.) and is currently orbiting around $94. We will discuss whether SOL has the potential to break higher with its projects and tokens.
Why Investors are Selling Solana?
Before attempting to assess whether Solana can indeed rebound from its current levels, it is important to understand what lead to the strong selling in the cryptocurrency. While some analysts are pointing the recent OpenSea phishing attack as the cause, Solana suffered from more severe issues.
Congestion in the network weighed on the cryptocurrency last month. The recent wormhole bridge hack only fueled the selling.
source: ethexplorer
Over $320 million were stolen via the wormhole bridge that allowed investors to ETH from the Ethereum blockchain to Solana. The ETH is converted to Wormhole ETH or wETH for short, which is pegged to the value Ethereum in the ETH blockchain.
A vulnerability in the bridge's function (validator action approval or VAA for short) enabled the hacker to mint 120,000 wETH, which were valued a notch over $322 million. The hacker transferred 93,750 wETH back to ETH, the remaining 26,250 wETH were swapped for 432,662 SOL (approx.).
source: wETH minting hack recorded at solana explorer
As 120,000 wETH were missing (from the mint) they required to be replaced. Initially there was great uncertainty who will provide the missing cryptocurrencies.
Jump Crypto Replaced 120,000 wETH
A message was sent to the attacker via Notifi, an Ethereum messaging service. The hacker was offered a bounty of $10 million for the exploit details and the return of the minted wETH,
"We noticed you were able to exploit the Solana VAA verification and mint tokens. We'd like to offer you a whitehat agreement, and present you a bug bounty of $10 million for exploit details, and returning the wETH you've minted."
(View the full message on Notifi)
The hacker ignored the message and kept the 93,750 ETH in his account.
Jump Crypto shortly announced on their twitter that they have replaced the missing 120,000 wETH in order to sustain the network. Without the cryptocurrencies there would have been serious repercussions. The vulnerability in the wormhole bridge was patched.
source: twitter
The bridge hack is what took SOL below $100 in the market. Investors would like to see some reassurance that security is a top priority Solana is trading in tandem with leading cryptocurrencies such as ETH and Bitcoin.
Solana OpenSea Integration?
The hacker house events are a great idea. Core Solana Labs engineers participate in offline events, providing educational programming on DeFi, NFTs and how to start working with Solana. If the events would have been announced following the bridge exploitations and not in January perhaps it would have had some impact on SOL.
We explored the play to earn games that are based on Solana's blockchain. According to playtoearn.net that is listing the top 50 games per blockchain, only 3 games that are based on Solana are actually live. Most of the games are in development or in beta and alpha.
Age of Sam, a popular NFT Solana based project may be insufficient to lift the cryptocurrency higher.
At the end of January speculations on Solana OpenSea integration surfaced. A well-known Hong Kong hacker by the name Jane Manchun Wong is notorious for unearthing app features before they are publicly announced.
Jane has already revealed features on Instagram, Spotify and Facebook before they were announced to the public. According to a tweet on 25 January 2022, OpenSea is developing an integration with Phantom wallet.
Phantom wallet is used for buying and selling crypto and NFTs on the Solana blockchain.
source: twitter
Jane claims she used reverse engineering to unmask OpenSea's intentions to integrate Solana into the NFT marketplace. OpenSea declined to confirm it has such plans.
Adding SOL to OpenSea, which is currently the biggest NFT marketplace platform may contribute to SOL recovery from the bridge hack. Due to the recent phishing attack OpenSea experienced, if such plans ever existed they may now be delayed.
Is It a Good Time to Buy Solana?
From the technical end, Solana may struggle to trade back above $130. The next support based on the monthly chart is around $52. To invalidate the downtrend in the monthly chart, SOL may require to trade back above $160.
Based on the daily chart, some support is offered at the $84 mark. If Solana succeeds in breaking above $121 it may extend its gains towards $140.
Portals announced last week they have raised $5 million to built a metaverse platform based on the Solana blockchain. Foundation Capital and Alameda Research participated in the funding round.
Adam Gomez, co-founder of Portals, said, “We are building an entirely new Times Square in the metaverse." Building the platform may take time and had no impact on cryptocurrency.
President Biden is expected to issue the executive order on cryptocurrencies this week. The executive order will instruct governing bodies to begin the coordination of crypto regulations. It is unclear at the time of this writing the impact the order will have as it is widely anticipated.
One event that have triggered a reaction in the crypto markets is the Fed monetary policy. A rate hike is expected in March 2022 with possible insights into the pace of future rate hikes. It is still early to predict how will the Fed impact SOL as it greatly depends on the monetary policy.
The daily support at the $84 appears to be the only lifeboat for SOL at the time of this writing.